Oil futures rallied Thursday, with U.S. prices posting their highest finish since 2019 after the Organization of the Petroleum Exporting Countries and its allies said they will rollover current production cuts to the end of April.
The group, known as OPEC+, approved a “continuation of the production levels of March for the month of April.”
Russia and Kazakhstan, however, will be allowed to boost production by 130,000 and 20,000 barrels per day, respectively, “due to continued seasonal consumption patterns,” it said.
Read: OPEC+ extends output cuts through April, in surprise move
Saudi Arabia also extended its voluntary output cut of one million barrels per day, which was due to expire at the end of March, through the month of April.
During the press conference, Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman said the Saudis will “gradually phase” back in the one million barrels per day it has cut from its own production.
“We’re not fast, we’re not furious — we’re cautious,” he said. “Our voluntary cut came through our own will, bringing it back will also be decided by our own will.”
West Texas Intermediate crude for April delivery CL.1,
May Brent crude BRN00,
Short-term oil demand is “very difficult to forecast, so it is hard to say whether or not OPEC+ is making the right decision,” Alissa Corcoran, director of research at Kopernik Global Investors. “It is likely, however, that should the oil price rise on tight supplies, other oil producers will fill that void.”
Crude had also rallied Wednesday after Reuters reported that OPEC+ would consider rolling over existing curbs through April, though Bloomberg , reported that Russia was leading a charge to reopen the taps.
With Thursday’s output decision, OPEC+ has clearly “decided to take a cautious approach on the demand recovery,” said Ann-Louise Hittle, vice president of macro oils at Wood Mackenzie. “However, waiting for a solid sign of strong stock draws means prices will have already increased from the present level by the time that sign emerges.”
Wood Mackenzie forecasts global demand will increase 6.3 million barrels per day year on year in 2021, she said. It also expects Brent oil prices to rise toward $70 to $75 during April, assuming that OPEC+ does not raise output that month, with the exception of Russia and Kazakhstan.
“The risk is these higher prices will dampen the tentative global recovery. But the Saudi Energy Minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production,” said Hittle.
Oil prices on Wednesday climbed sharply despite data from the Energy Information Administration that revealed a 21.6 million-barrel weekly rise in U.S. crude supplies, but disruptions to refinery activity following frigid temperatures in mid-February contributed to significant declines in gasoline and distillate stockpiles.
On Nymex Thursday, April gasoline RBJ21,
Natural-gas futures ended lower after the EIA reported on Thursday that domestic supplies of natural gas declined by 98 billion cubic feet for the week ended Feb. 26. On average, the data were expected to show a fall of 137 billion cubic feet for the week, according analysts polled by S&P Global Platts.
April natural gas NGJ21,
