OPEC’s decisions support oil prices


OPEC’s decisions support oil prices. Brent is close to $ 70 and West Texas crude on its highest levels since two years

OPEC’s decisions support oil pricesFor the first time since 2020, Brent oil has exceeded $ 69 a barrel,
while Western Texas Mediator is traded at its highest level since April 2019.

On Friday evening, Brent crude futures for May’s delivery rose by $ 2.26 according to Trading Economics,
as Brent traded at $ 69 a barrel, while Western Texas Mediator futures for April traded at $ 65.96 a barrel increasing by $ 2.13.

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Standard week for oil prices

Oil prices ended their week by a noticeable rise.

Brent crude price (Algerian oil reference standard) is already approaching $ 70,
while the West Texas Intermediate index exceeded the barrier of $ 66 a barrel.

Black gold has not reached these levels for almost 2 years.

These sharp increases are mainly due to OPEC’s decision to keep a decrease in production.

Oil prices ended the week at their highest levels at all since May 2019.

Brent North Sea Crude May’s delivery rose by 4.20%, from Thursday’s closing to reach $ 69.54 a barrel.

This represents an increase of approximately $ 7 compared to the beginning of the week.

For West Texas Intermediate crude futures for April’s delivery, rose by 3.81% to record $ 66.26,
which represents a rise of more than $ 6, compared to Monday’s trading.

The main reason for high prices is the decision announced on Thursday
by members of the Organisation of Petroleum Exporting Countries (OPEC) and their allies.


OPEC’s decisions that supported prices

OPEC+ has refused to increase oil production by 500,000 barrels a day in April.

Saudi Arabia has also extended its voluntary restrictions of 1 million barrels for a month.

The organization has also given exclusive rights to Russia and Kazakhstan,
as they can increase their production from April.

Analysts believe that prices of West Texas Intermediate crude may reach $ 75 a barrel.

Brent crude price may rise to reach $ 80 a barrel and more by summer.


Analysts praise OPEC’s decision

Morgan Stanley analysts described the decision as “unexpected”, as they said: “For the third consecutive meeting,
OPEC + was” cautious” “to renew current quotas, except Russia and Kazakhstan which may increase their supplies by 150,000 barrels a day.

Saudi Arabia’s decision

Saudi Arabia’s decision to keep its voluntary and additional reduction of 1 million barrels a day next month,
has been cutting a long way to make “a real shock wave in the oil market”, according to Wyden Wenberg from Komerts Bank.

Black gold prices are expected to rise more, as experts say.

Giovanni Stunovo, an analyst at UBS said: “oil inventories are expected to decline at a fast rate during April,
which by its turn will lead to an increase in oil prices.


The US Investment Bank

For its part, US Investment Bank, Goldman Sach expects that price of a barrel may reach $ 80 during the third quarter of 2021, while it previously expected a price of $ 75 a barrel for this period, as financial institution amended its forecast
for Brent crude by an increase of $ 5 between July and September 2021.

Crude oil returned to its levels before chaos caused by Coronavirus.

Now, global demand prospects for the commodity have become better leaving behind a low price scenario that has remained during the second and third quarters of 2020.

Increased demand resulting from a gradual economic recovery to a further discipline in reducing production by OPEC + led by Russia and Saudi Arabia.


Last year’s decline in oil supports prices now

In the midst of extreme shrinkage of prices, producing companies decided to modify their investment plans,
cancel or postpone them to protect liquidity and accommodate low prices environment and great uncertainty regarding returning to a “natural” situation.

Influence resulted from a reduction in global production voluntarily in some cases such as OPEC + and in other cases because extraction costs exceeded sales costs as it happened in April when Brent Crude was traded at less than the US $ 20 a barrel.

West Texas Intermediate reached negative levels of US $ 30 a barrel.

Similarly, cuts in investment and exploration plans will have a long-term effect.

Deflation in investment during last year and now will provide less medium-term supplies.

This leads to higher prices.

What makes this happen, the economy must maintain its recovery rate.

In addition, price wars that happened during the first half of the year should not break again,
as surplus production and large decreases of prices may be reviewed during the first half of the year.


Factors support /do not support continuing bullish wave

At present, the main factors that move prices are:

* Agreement of reducing production which remains strong by OPEC + who agreed during the middle of the week not to increase production, while markets expected an increase of 500,000 barrels a day.

* Decline in gasoline inventories in the United States by 14 million barrels to reach 243.5 million,
which indicates that demand for refined products and crude oil may rise.

* pumping more economic incentives for the US economy,
which makes the growth of production having greater cash support.

Thus, demand for fuel will be supported.


factors that do not support prices are:

* Recovery of the economy has not been consolidated yet.

Many mixed signals will come from many world production centers.

* China, as the largest importer, may slow its purchases as its storage facilities are at higher levels of 85%.

* with high prices, many of OPEC + producers will have incentives to override share of production or to make reductions more flexible to improve their income.

* Iran can quickly offer 2.5 million barrels a day, in addition to relieving sanctions on the United States now after a new foreign policy began to work at White House.

Despite this, no one can predict what is happening in this market.

Now, clear indicators that oil is recovering from all Corona crisis losses.

Now, the market is on its way to restore its best levels.

OPEC’s decisions support oil prices