Oil prices climbed high on Monday after the agreement by OPEC+ on Saturday to extend the current production cut deal until the end of July, and China’s crude imports hit an all-time high figure in May.

Brent crude and U.S. West Texas Intermediate (WTI) crude both hit their highest since March 6, 2020. Brent crude was up by 1.2 percent (51 cents) at $42.81 per barrel, while U.S. WTI crude was up by 0.8 percent (32 cents) at $39.87 per barrel.

A pattern of gradual increase has been recorded since the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to cut global supply by 9.7 million barrels per day, after the historically low oil prices caused by the COVID-19 pandemic. Even though some of the OPEC countries did not fully comply for the first month, additional cuts in supply by Saudi Arabia, Kuwait and other countries also contributed to stabilizing the oil market.

The drop in oil prices began on March 6, when OPEC and Russia failed to reach an agreement on supply cuts. One of the resolutions of the OPEC meeting held last Saturday was that the defaulting OPEC countries (Nigeria and Iraq) and their allies were to compensate other members and allies by having further  supply cuts.

Chinese importers have been taking full advantage of the current situation by importing loads of crude oil, with reports indicating that there was an all-time-high import figure for China in May. The world’s largest importer of crude imported 11.3 million barrels per day in May.

Howie Lee, an Economist at Singapore Bank OCBS, said that it would require a lot more than the production cut to push oil prices back to pre-COVID-19 numbers. He said, “It’s a big gap there; you need a strong conviction to go from $43 to pre-crash levels.” He also believed that the extension of the current cut deal to the end of July by OPEC would cause a supply deficit by October.

The announcement by the National Oil Corporation of Libya (NOC) on the reopening of two major oilfields, after months of a blockade is seen as positive news in the journey to the recovery and stability of the global oil market.

Meanwhile, according to data from Baker Hughes Co, the number of operations in the U.S. oil and natural gas rigs fell to a record low for a fifth week in a row in the week to June 5. This means that even though oil prices are rising, most U.S. shale producers are still running at a loss, thereby leading to shutdowns, layoffs and cost-cutting in the country. It was reported on Friday that about 30 per cent of the country’s offshore oil output was shut, as tropical storm Cristobal entered the Gulf of Mexico.