Oil futures edged higher Thursday, finding support following back-to-back session declines, as traders await a decision by the Organization of the Petroleum Exporting Countries and its allies on how to adjust existing output curbs beginning next month.
“As OPEC+ meets, the physical oil market is well supplied,” said Ann-Louise Hittle, vice president Macro Oils, at Wood Mackenzie. “However, that will shift over this quarter when we expect total demand to outpace supply.”
“A decision to keep OPEC+ output mostly unchanged for May from April would accelerate the rebalancing and risks overshooting, leaving the market at risk of price volatility,” she said in emailed commentary. “A sharp rise in prices from current levels in the low $60s per barrel would increase the risk of dampening both the global economic recovery and the revival in demand now under way.”
In opening remarks at the OPEC+ meeting Thursday, Saudi energy minister Prince Abdulaziz bin Salman said that “the reality remains that the global picture is far from even, and the recovery is far from complete.”
“On the supply side, we have continued to play our part,” he said. “Compliance with the levels we agreed has — once again — been impressive,” with new aggregate levels set at 113%. But “we have to approach the coming weeks with the same admirable commitment.”
“Until evidence of the recovery is undeniable, we should maintain this cautious stance,” Prince Abdulaziz said.
West Texas Intermediate crude for May delivery rose $1.06, or 1.8%, to $60.22 a barrel on the New York Mercantile Exchange. June Brent crude the global benchmark, was up 85 cents, or 1.4%, at $63.59 a barrel on ICE Futures Europe.
Both crude benchmarks ended Wednesday with a monthly loss of close to 4%.
“Thanks to the fresh round of virus infections across some important regions of the world and the extension of lockdowns in part of Europe, it looks like the only options are a rollover of existing cuts in May and followed by a gradual increase in production thereafter,” said Fawad Razaqzada, analyst at ThinkMarkets, in a note. “This outcome is likely to have been priced in.”
There is an outside chance OPEC+ could agree to allow production to rise, which would come as a surprise to the market and would likely trigger selling even if the increase is small.
“So, whichever way you look at it, the risks are skewed to the downside, as a rollover is expected” he said.
U.S. Energy Secretary Jennifer Granholm late Wednesday tweeted that she had talked with Saudi Energy Minister Abdulaziz bin Salman al-Saud and had “reaffirmed the importance of international cooperation to ensure affordable and reliable sources of energy for consumers.”
We also discussed closer collaboration to solve common challenges and develop renewable energy sources, increase efficiency, reduce methane in oil and gas production, and develop clean forms of hydrogen to combat climate change. 2/2
— Secretary Jennifer Granholm (@SecGranholm) April 1, 2021
Petroleum-product futures also climbed Thursday. May gasoline tacked on 1.6% to $1.99 a gallon and May heating oil added 1.9% to $1.80 a gallon.
May natural gas rose 0.8% to $2.63 per million British thermal units ahead of a weekly update on U.S. supplies of the fuel from the Energy Information Administration due shortly.
On average, analysts forecast an increase of 19 billion cubic feet for the week ended March 26, according to a poll conducted by S&P Global Platts.