(Bloomberg) – Oil rises above $ 65 a barrel after OPEC + chooses not to slacken supplier weakening, even as the world economy pulls out of its slump driven by the pandemic, confusing general expectations that the group the taps would loosen.
The surprise decision on Thursday spurred a spate of upgrading the crude price forecast by major banks and an increase in market structure. The producer union has agreed to keep production steady in April, while Saudi Arabia has said it will maintain its voluntary production cut of 1 million barrels per day. West Texas Intermediate rose 2.6% and Brent topped $ 68.
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Crude oil rose this year, this is higher due to OPEC + inventories and the recovery of the vaccine in consumption which weakened stocks. The group’s decision is a victory for Riyadh, who is campaigning for stiff curbs to support prices.
“Overall, it was the most positive outcome we could expect,” said JPMorgan Chase & Co. analysts, including Natasha Kaneva, wrote in a note to clients.
The Organization of Petroleum Exporting Countries and its allies, including Russia, have debated whether to repair as many as 1.5 million barrels a day. As part of the agreement, which was concluded at a virtual meeting on Thursday, exemptions were granted to Russia and Kazakhstan. The group’s next meeting is scheduled for April 1 to discuss production levels for May.
Saudi Arabia’s daring and unexpected venture to curb production is based on the view that higher prices this time around will not lead to a large increase in production by US shale drills. Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg News after the OPEC + meeting that shale companies are now more focused on dividends.
The rapid gains of Oil this year are intensifying the debate over the possible revival of inflation, and complicating the task facing the Federal Reserve because it supports the US recovery. The treasury market is already looking for signs of faster price increases, with yields rising rapidly. Crude oil has risen more than 8% since closing Tuesday despite a strengthening of the dollar and strong sell-offs in other major commodities, particularly economic copper.
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Goldman Sachs Group Inc. increased its Brent forecasts by $ 5 per barrel and now sees the global crude benchmark at $ 80 in the third quarter. JPMorgan increased its Brent projection by $ 2 to $ 3 per barrel, and Australia & New Zealand Banking Group Ltd. increased its three-month target to $ 70. Citigroup Inc. said crude prices could reach $ 70 before the end of this month.
Change rate
Oil rising to these levels is likely to increase tensions in OPEC + as some members want to pump more to ease economies under pressure, Citi said in a note. Top importers such as China and India will also not be happy and the alliance is likely to change course at the next meeting, he said.
The lack of fresh supply was reflected in the oil futures curve. Brent’s rapid passage of time has deteriorated to 63 cents, a strong structure where prices of almost obsolete prices are higher than those of later, from 54 cents on Thursday. Meters further along the oil-term curve also rose.
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