Crude oil prices are rallying higher at the last trading session of the week, headed for the fifth week of gains.
OPEC+ members agreed to continue limiting crude oil production to cope with the COVID-19-hit demand, but the compromise agreed on wasn’t what oil traders had really hoped for.
- At the time of writing this article, Brent crude futures gained over 1%, as it was within striking distance of hitting the $50/barrel price mark after gaining around 1% on Thursday.
- West Texas Intermediate futures were also surging by over 1% trading around $46/barrel.
- OPEC+, the popular alliance that includes OPEC members, Russia, and other leading oil producers, agreed yesterday to ease deep oil output cuts from January by producing half a million barrels per day, but still failed to reach a compromise on a broader policy for the rest of 2021.
- Oil traders had earlier anticipated that the popularly known oil cartel group would roll over oil cuts of 7.7 million barrels per day or about 8% of global oil production, at least until the end of Q1 2021.
What they are saying
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave vital insights on the outcome of the all-important meeting, and the high expectations of significant price volatility at the crude oil market:
“All eyes were on the OPEC+ meeting overnight, where oil ministers ended up meeting at the halfway house and sharing a glass half full in a typical OPEC + fudgy. They came up with the ultimate compromise as the producer’s group agreed to taper production increases.
“They will start with 500k barrels from January and hold monthly meetings to review prices and decide on output policies. These meetings will bring some volatility to the market and, importantly, stand to make hedging harder for US producers.
“One interesting but not so cohesive front was Saudi Arabia and Russia usually chair the meeting; only Russia did the honours this time. Some see this as a clear sign of the conflicts within the organization.”
What to expect
Looking at the recent price action, Nairametrics is of the opinion that the futuristic price movements of oil prices would largely depend on the degree to which OPEC+ cohesion remains intact.