“OPEC+ discipline has been a real positive”
Oil is eyeing $60 per barrel thanks to OPEC+ policy and hopes for economic revival
Oil markets saw an inspiring rebound last week. OPEC+ compliance with cuts and optimism about economic recovery prospects helped crude climb to a one-year high. However, demand is expected to stay depressed in 2021.
Oil prices rose by about 1% on 5 February after hitting their highest in a year and almost reaching $60 per barrel, reports Reuters adding that the last time Brent traded at $60 per barrel, the pandemic had yet to take hold, economies were open and demand for fuel was much higher. Last week’s growth was supported by economic revival hopes and OPEC+ supply curbs as well as good news from the United States, where stock markets hit record highs on signs of progress towards more economic stimulus. Brent crude ended the session at $59,34, while US crude settled up at $56,85. Overall, Brent added about 6% last week.
“Brent is eyeing the $60 level now that OPEC+ has successfully eased most supply side concerns and optimism on the COVID front improves globally,” commented Edward Moya, senior market analyst of OANDA brokerage. “The fundamentals remain solid for crude, but a consolidation seems likely given the recent run-up”, he added.
“OPEC+ discipline has been a real positive”, considers Michael McCarthy, chief market strategist at CMC Markets. Record output cuts implied by the world’s key oil producers have helped lift prices from historic lows last year. At a meeting on 3 February, the alliance agreed to continue with its supply tightening policy.
According to Head of Oil Markets at Rystad Energy Bjørnar Tonhaugen, what is really helping the market today “once again comes from Saudi Arabia and its top firm, Aramco”. The latter raised its Arab Light official selling price to Northwest Europe for March by $1,40 per barrel from the previous month. This could sign that Saudi Arabia is more confident in the demand outlook, believes Tonhaugen. Nonetheless, even optimists do not expect oil consumption to return to pre-pandemic levels until 2022.
Meanwhile, the US oil rig count, which is also an early indicator of future output, has risen for five months in a row. Yet the pace of recovery in the US remains slow, and the government expects the country’s output to stay below its 2019 record of 12,25 million bpd until 2023.