OPEC+ Meeting: What’s Next for Oil Prices

Saudi Arabia also said that it would extend its one million barrels per day voluntary production cut into April, encouraged allied partners to remain “extremely cautious” on production policy, and warned the group against complacency as it seeks to ensure a full oil market recovery. Saudi Arabia remains the core force behind the market management strategy and is by far the most cautious out of all member states.

Non-OPEC leader Russia, meanwhile, had indicated that it wanted to push ahead with a supply increase, claiming last month that the market has already balanced. The Russians will increase production by 130,000 barrels per day, Kazakhstan will increase their output by 20,000 barrels per day.

Crude futures have soared to pre-virus levels in recent weeks, driven higher by substantial OPEC+ production cuts and the mass rollout of Covid-19 vaccines in many high-income countries. After soaring to pre-virus levels in recent weeks, American light oil jumped above $65.60 after the meeting. Brent prices rose as well – prices hit the highest in nearly 14 months.

Could oil rip higher now? Will Saudi Arabia actually surprise the market by not returning its two-month unilateral cuts of 1m bl/day which it is holding through February to March 2021? Does the Covid crisis still pose downside risks to the global economy?

Michael Stark, market analyst at Exness, explains: “There’s still no clear reason for OPEC’s members to expand production significantly. Many are aware that hiccups in vaccination or a slow restart to travel this year might be negative for the price of oil. Equally, US shale remains a concern for traditional producers: Baker Hughes’ rig count has risen steadily since the start of the fourth quarter of 2020, reaching 310 on 5 March, as the price incentive has returned and despite wipeout in this area last spring as prices crashed. Most producers are very eager to avoid a repeat of the glut this time last year.”

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