Crude oil prices hit 2-1/2 year highs after OPEC+ extends oil production cuts through April

Crude oil prices hit $67.94 this morning, which is the highest level recorded since October 2018 on improving fundamental picture for “black gold.”

Fundamental analysis: Oil production cuts extended

OPEC+, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, decided to prolong production cuts for an additional month in spite of a price rise in oil for the purpose of limiting the supply until stronger economic recovery. 

The group announced that most of the current production cuts would continue during April, except for Russia and Kazakhstan who were allowed to slightly raise their output.

Back in January, the group came to an agreement to maintain steady production during February and March. During that period, Saudi Arabia said it would slash its production by an additional 1 million barrels per day. On Thursday, the world’s biggest oil exporter also agreed to extend its production cut through next month.

Surging oil prices have raised optimism among producers lately that production cuts have placed the market in a strong position following the devastating coronavirus-induced market crash. However, the OPEC+ decided to avoid taking risks in April with its supply cut currently amounting to around 8 million barrels per day.

Minister of Energy of Saudi Arabia Abdulaziz Bin Salman said the "jury is still out", referring to the future of the oil industry. 

Technical analysis: Can it sustain gains?

The impressive bullish run in crude oil prices has extended this Monday as the price action soared almost 3% early in the morning to print a 2-and-a-half year high of $67.94. This came after oil prices gained 7.7% last week. 

However, this morning’s rally has already ended with oil prices trading nearly unchanged on the day. Profit-taking, most likely, has facilitated a pullback in crude oil prices with intraday support located at $63.80. 

Summary

The OPEC+ has decided to extend the current oil production cuts through April, limiting the supply until stronger economic recovery.