SINGAPORE: Brent crude prices eased on Friday but hovered near $70 a barrel as production cuts by major oil producers constrained supply, with optimism about a recovery in demand for the resource in the second half of the year also lending support.
Brent crude futures for May slipped 33 cents, or 0.5 percent, to $69.30 a barrel in early trade while US West Texas Intermediate crude for April was at $65.65 a barrel, down 37 cents, or 0.6 percent.
After seven straight weeks of gains, front-month Brent could close this week little changed as investors took profit after prices touched a 13-month high on Monday following attacks on Saudi Arabian oil facilities.
Sentiment was also buoyed by the decision of the Organization of Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, earlier this month to largely hold production cuts in April.
Investors have been pumping funds into commodities such as oil on expectations of a demand recovery in the second half of the year as the global economy grows, while a wider rollout of vaccines against the COVID-19 pandemic allows more people to travel this summer.
“Assuming vaccination programs are successful, we expect pent-up demand for gasoline to be released this summer during the US and European driving season,” FGE analysts said in a note.
RBC Capital analysts said the fundamentals for summer gasoline is the most bullish in nearly a decade.
“We think this will support the entire oil complex this summer and beyond.”
OPEC said on Thursday a recovery in oil demand will be focused on the second half of the year.
The United States, world’s largest oil consumer, saw a massive draw on US gasoline stocks last week as the winter storm in Texas disrupted refining output.
Oil prices sustained at higher levels are expected to draw US producers to increase output, JP Morgan analysts said in a weekly note.
“At current prices, most US onshore operators are economic, leaving a vast group of operators, from large public companies to private players, in good position to ramp up activity in 2H21 and build solid momentum for higher volumes in 2022,” JP Morgan said.
The bank now expects US crude oil production to average 11.78 million barrels per day (bpd) in December 2021, up 710,000 bpd annually, with the full year volume to average 11.36 million bpd compared with 11.32 million bpd in 2020.
Oil eases but stays near $70 on demand optimism
https://arab.news/9384b
Oil eases but stays near $70 on demand optimism
- Crude records seven weeks of gains
- OPEC sees recovery focused on H2
OPEC+ approves gradual output increase from April amid market uncertainty
RIYADH: Eight OPEC+ producers agreed to raise oil output gradually from April, citing healthy market fundamentals and a stable global economic outlook, after ministers met virtually to assess market conditions and determine future supply policy.
Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman approved a production increase of 206,000 barrels per day for April, according to a statement.
The increase marks the start of a gradual unwinding of 1.65 million barrels per day in voluntary reductions introduced in April 2023 to shore up prices.
The move comes as the US-Israeli conflict with OPEC+ member Iran and Tehran’s retaliation have disrupted shipments in the Middle East. Oil, gas and other cargoes moving through the Strait of Hormuz have faced interruptions since Feb. 28 after shipowners received warnings from Iran that the area was closed to navigation, Reuters reported.
In a statement released after the talks, the eight nations cited a “steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories,” as the rationale for the measured production increase.
The statement stressed that the full 1.65 million bpd “may be returned in part or in full subject to evolving market conditions and in a gradual manner.”
They also stressed they retain flexibility to increase, pause or reverse the supply hike if needed. That includes the option of reinstating cuts announced in November 2023, when several members pledged additional voluntary reductions totaling 2.2 million barrels per day.
The producers reiterated their commitment to the broader Declaration of Cooperation and said compliance with output targets, including voluntary adjustments, will continue to be monitored by the Joint Ministerial Monitoring Committee.
The group also reaffirmed plans to compensate for any overproduction recorded since January 2024, saying the phased increase would allow participating countries to accelerate those efforts.
Brent crude futures jumped on Feb. 27 to $73 per barrel, the highest level since July, amid fears of a wider Middle East conflict and potential supply disruptions through Hormuz, which accounts for more than 20 percent of global oil transit, Reuters reported.
Oil prices are expected to rise, with Barclays lifting its Brent crude forecast to around $100 a barrel from $80 a day earlier, while analysts said prices could jump by as much as $20 per barrel when trading resumes on March 2 if tensions escalate further.
The eight countries will continue holding monthly reviews of market conditions, conformity and compensation levels, with the next meeting scheduled for April 5.
