U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading sharply higher on Thursday as bullish forecasts of recovering demand dampened worries about the impact of rising COVID-19 cases in India, Japan and Brazil.
The price action suggests investor confidence in OPEC+’s ability to control production and stabilize the market as the global economy returns to health and demand eventually recovers to pre-pandemic levels.
At 14:46 GMT, June WTI crude oil futures are trading $64.68, up $0.82 or +1.28% and July Brent crude oil is at $67.69, up $0.91 or +1.36%.
OPEC+ Sticks to Gradual Easing Plan
OPEC, Russia and their allies will stick to plans for a phased easing of oil production restrictions from May to July amid upbeat forecasts for a recovery in global demand and despite surging coronavirus cases in India, Brazil and Japan, Reuters wrote.
Earlier in the week, OPEC+ members cancelled a ministerial meeting after deciding to stick to policies broadly agreed at a previous April 1 meeting, Russian Deputy Prime Minister Alexander Novak said.
Novak also said the next OPEC+ ministerial meeting was scheduled for June 1 to review output levels for July and August. An OPEC+ statement also confirmed the June 1 date for the next meeting.
At the April 1 meeting, the group agreed to bring 2.1 million bpd back to the market from May to July, easing cuts to 5.8 million bpd. This is down from a cut of about 8 million bpd earlier in the year.
OPEC+ Oil Demand Forecast
Earlier in the week, the OPEC+ joint technical committee (JTC) voted to keep its forecast for growth in global oil demand this year, but is concerned a-19 cases in India and elsewhere, three sources from the producer group told Reuters.
“Demand growth is still at 6 million bpd for 2021,” one of OPEC+’s sources said.
Daily Forecast
The spike to the upside is a clear indication that investors believe the surge on COVID-19 cases in India, Japan and Brazil is only temporary. It also indicates that investors have confidence in the latest OPEC+ forecast that calls for commercial oil stocks to reach 2.95 billion barrels in July, taking them below the 2015 – 2019 average and that they will stay below the average the rest of the year.
OPEC+ also said it saw stocks at about 70 million barrels below the average for the whole of 2021, a more optimistic outlook than its previous forecast of 20 million barrels below the average.
For a look at all of today’s economic events, check out our economic calendar.
