Oil up as OPEC+ meets to decide on production policy

Oil prices rose on optimism about U.S and European economic recoveries and expectations OPEC and its allies will keep production curbs in place.

Brent crude rose $1.02, or 1.6%, to $63.76 a barrel and U.S. oil was up $1.23, or 2.1%, at $60.39 a barrel. The Organisation of the Petroleum Exporting Countries, Russia and other allied producers, a group known as OPEC+, were considering output policy on Thursday. The group is debating options for May and beyond, including whether to roll over existing cuts or gradually increase production, three OPEC+ sources said.

Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said the market’s recovery was “far from complete”.

Russian Deputy Prime Minister Alexander Novak said in the meeting that he expected global oil demand to grow by 5 to 5.5 million barrels per day (bpd) this year. OPEC+ has reduced output by about 7 million bpd to support prices and reduce oversupply. In addition, Saudi Arabia made an extra 1 million bpd voluntary cut. “Given the recent wobble in prices, along with demand concerns re-emerging once again, there is a growing consensus that the OPEC+ will likely roll over current cuts for an additional month,” ING analyst Warren Patterson said. OPEC+ has trimmed its oil demand growth forecast for this year by 300,000 bpd because of renewed lockdowns. France entered its third national lockdown and schools closed for three weeks to try to contain a third wave of COVID-19 infections.

Despite the new wave, European markets have recovered most of their pandemic-driven losses on strong manufacturing activity. March data showed euro zone factory activity growth galloped at its fastest pace in the history of the survey. Oil also found some support after President Joe Biden outlined a $2.3 trillion spending plan to invest in traditional projects, such as roads and bridges, alongside tackling climate change.

But market sentiment was tempered by an unexpected rise in U.S. claims for unemployment benefits. U.S. crude stocks fell unexpectedly last week, helping to support oil prices, the U.S. Energy Information Administration data showed. [EIA/S] “The inventory data … showed that the situation is continuing to normalise on the U.S. oil market,” Commerzbank analyst Eugen Weinberg said.

Reuters