Key OPEC+ Meeting Tomorrow
Crude oil prices have been moving higher in a continuous manner since the beginning of November. Oil prices went from $33.67 — the low for November — to as high as $63.79 in February, representing an increase of almost 90% in just four months’ time.
Last month’s high is the highest oil prices traded since the first week of 2020. The uptrend has been accelerated by strong activity in February when crude oil prices gained nearly 18% on reports of global vaccination campaigns.
“Ongoing stimulus measures, as COVID-19 vaccinations speed up, have boosted sentiment,” ANZ analysts wrote in a memo sent to clients.
Crude oil prices are trading 1.3% lower today ahead of OPEC+, a group of OPEC members and their allies led by Russia, meeting scheduled for tomorrow. Similarly, Brent crude oil prices are down 1% to trade at $63.70 a barrel.
Oil prices are trading about 6% off the recent high as commodity investors readjust their portfolio ahead of the OPEC+ meeting. There is uncertainty over how much supply OPEC+ will restore to the market at its meeting.
“The recent selloff may help reinforce Saudi’s cautious stance and delay any production increase. It’s probably something that could sway the OPEC+ increase more back toward the 500,000 bpd as opposed to the 1.5 million bpd,” said Stephen Innes, global market strategist at Axi.
Overall, analysts are expecting OPEC+ to agree to ease production cuts, which were imposed to limit the supply amid record low oil prices. However, analysts are divided as to how robustly the group will act following comments from the Saudi Arabian energy minister who called for producers to remain “extremely cautious.”
“OPEC+ is well aware of the market’s view: the remarkable achievement of the last ten months will be seriously damaged in case of complacency. The current oil balance could live with a moderate production increase but could not justify a bigger one,” said Tamas Varga, an analyst at PVM Oil Associates.
The energy market is potentially still in the “oversupply” zone after the American Petroleum Institute (API) reported US crude inventories jumped by 7.4 million barrels in the week ending February 26.
On the contrary, analysts were expecting a draw of 928,000 barrels. It is possible that higher inventories were reported as US refining capacity was closed down amid cold weather in Texas.
Oil prices have pulled back off the multi-month highs ahead of the crucial OPEC+ meeting scheduled for tomorrow.