Crude oil prices extend gains on account of the OPEC+ decision
- Crude oil prices are at a one-year high with Brent and WTI futures trading at $64.87 and $67.97 respectively.
- As part of the OPEC+ decision, Saudi Arabia will maintain its output cut of 1 million bpd in April.
- Russia and Kazakhstan will increase production by 130,000 bpd and 20,000 bpd correspondingly.
Crude oil prices extended their gains on Friday as the market reacts to OPEC+ decision to retain output cuts in April. The global and US benchmarks for crude oil are both trading at their highest levels since January 2020. WTI and Brent futures are up at 64.87 and $67.97 respectively. The current rally is an indication that the analysts’ predictions of $72 for WTI and $75 for Brent may turn into a reality.
OPEC+ decision on oil output
Investors who are keen to trade oil have had their eyes on Thursday’s OPEC+ meeting to decipher the direction of crude oil prices in the short and middle term. The coalition’s decision did not disappoint the bulls in the market. In mid-February, Saudi Arabia’s advisers indicated that the kingdom would not renew its pledge to cut production. However, Saudi’s energy minister noted that OPEC+ needed to be cautious about the fragile demand recovery.
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Indeed, this is the reasoning behind the alliance’s decision to maintain the current production levels in April. Analysts had predicted that OPEC+ will increase production by around 500,000 bpd. However, Saudi Arabia, the group’s leader, voluntarily extended its previous output cut of 1 million bpd. Russia, whose position was to increase production, will do so by 130,000 bpd in the coming month. Furthermore, Kazakhstan has been allowed to increase its oil output by 20,000 bpd.
Feasibility of analysts’ outlook
OPEC+ decision, and the subsequent rallying of crude oil prices, has strengthened the likelihood of analysts’ predictions becoming a reality. Last week, the Bank of America adjusted its forecast for crude oil prices on the upside. According to the institution, Brent futures would average at $60 per barrel in the current year. The number is an increase of $10 from its previous forecast.
At the same time, the bank predicted that $57 would be this year’s average price for WTI futures. As at the second quarter, it expects Brent prices to hit $70. Similarly, Goldman Sachs’ forecast is that the WTI and Brent futures will hit $72 and $75 per barrels respectively by this year’s third quarter.
At the current pace, these predictions could soon become a reality. As at 07.50 GMT, WTI futures were up by 1.38% to trade at $64.87. Brent futures were also on the rise at $67.97. After dropping slightly below the psychological level of $60 earlier in the week, the benchmark for US crude oil has since soared by close to 9%.