Oil futures on Friday were adding to their gains, a day after the Organization of the Petroleum Exporting Countries and its allies, in a surprise move, said they would rollover current production cuts to the end of April.
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.
West Texas Intermediate crude for April delivery CL.1,
May Brent crude BRN00,
“Crude prices rallied after OPEC+ stunned energy markets with the incredibly bullish decision to keep output unchanged,” wrote Edward Moya, senior market analyst at Oanda, in a daily research note.
“Oil prices could rip higher now that a tight market is likely up through the summer,” he predicted.
Thursday’s decision by OPEC and its allies to keeep its output curbs in place is viewed by market participants as the group adopting a cautious approach to the global economic recovery from the pandemic that has disrupted uptake of fossil fuels and pummeled crude values.
That said, the rapid surge in crude prices ahead of a stronger sign of global economic recovery may leave prices vulnerable to a pullback some analysts caution.
“There is not much appetite from a recovering global economy for materially higher oil prices in the near term,” wrote analysts at trading and research platform axi, in a research note.
“But It looks clear that OPEC+ will instead run the risk of “overheating” the market temporarily than risk letting it slip back towards oversupply.”
