Oil Soars Above $66 With #Saudi Supply Gamble Buoying Crude Bulls - Bloomberg - closing price

Oil Soars Above $66 With Saudi Supply Gamble Buoying Crude Bulls - Bloomberg

Oil rallied to the highest in nearly two years in New York after OPEC+ shocked markets with a decision to keep supply limited as the global economy starts to recover from a pandemic-driven slump.

U.S. benchmark crude futures topped $66 a barrel on Friday, while its global counterpart Brent neared the key $70 level. The producer alliance’s supply curbs and the rollout of Covid-19 vaccines have aided a stellar rebound for crude from the depths of the coronavirus-related fallout. OPEC+’s surprise decision on Thursday to keep output steady in April boosted prices further and led to strength in the market’s structure. Major banks upgraded price forecasts, with some calls for oil reaching north of $100 next year.

“In some ways, even more important than the lack of oil was the message that came with it: They’re not really worried about price, not worried about tightening,” said Paul Horsnell, head of commodities research at Standard Chartered Plc. “The door is wide open to prices beyond $70.”

Crude has soared more than 30% so far this year with OPEC+’s output restraint holding the market over until a full-fledged comeback in consumption. The group’s latest decision represents a victory for Riyadh, which has advocated for tight curbs to keep prices supported.

PRICES: West Texas Intermediate for April delivery advanced $2.26 to settle at $66.09 a barrel, the highest level since April 2019 Futures surged 7.5% this week, the largest weekly gain in a month Brent for May settlement climbed $2.62 to end the session at $69.36 a barrel

'I'll believe it when I see it' - #SaudiArabia doubts oil recovery and keeps taps tight | Reuters

'I'll believe it when I see it' - Saudi Arabia doubts oil recovery and keeps taps tight | Reuters

This week’s surprise decision by Saudi Arabia and other top oil producers to broadly stick with output cuts despite rising crude prices was influenced by events in an unexpected place - Italy.

About a year after the country’s financial heart became one of the first European cities to enter a lockdown to curb the spread of COVID-19, Milan is again facing restrictions.

“Take a look at what is happening in Milan today,” Saudi energy minister Prince Abdulaziz bin Salman Al-Saud told a news conference on Thursday after a meeting of OPEC and its allies.

“These things, they don’t keep you at ease with the idea of venturing, leaping into an unknown future,” he added.

Restrictions on movement destroyed up to a fifth of oil demand last year and led OPEC and its allies - known as OPEC+ - to make record output cuts.

And while global oil futures are back where they were before the pandemic - which for many pundits and investors heralded more production from OPEC+ - the recovery in fuel demand has been tepid as global travel remains subdued.

Oil Soars Above $66 With Saudi Supply Gamble Buoying Crude Bulls - Bloomberg

Oil Soars Above $66 With Saudi Supply Gamble Buoying Crude Bulls - Bloomberg

Oil rallied to the highest in nearly two years in New York after OPEC+ shocked markets with a decision to keep supply limited as the global economy starts to recover from the pandemic-driven slump.

U.S. benchmark crude futures topped $66 a barrel on Friday, while its global counterpart Brent edged closer to the key $70-a-barrel level. The producer alliance’s aggressive supply management and the continued rollout of vaccines worldwide has aided a stellar rebound for crude since the depths of the coronavirus-related fallout. OPEC+’s surprise decision on Thursday to keep output steady in April has accelerated those price gains, spurring a wave of upgrades in oil price forecasts by major banks and a surge in the market’s structure.

PRICES: West Texas Intermediate for April delivery advanced $2.18 to $66.01 a barrel at 12:34 p.m. in New York, the highest intraday level since April 2019 Futures are poised for the largest weekly gain in a month, up more than 7% so far this week Brent for May settlement climbed $2.48 to $69.22 a barrel

Here’s What Goldman to UBS Are Saying About #Saudi-Led Oil Shock - Bloomberg

Here’s What Goldman to UBS Are Saying About Saudi-Led Oil Shock - Bloomberg

The surprise move by OPEC+ to maintain oil supply restrictions through April, coupled with Saudi Arabia’s decision to extend voluntary curbs, has stunned the global energy market. Prices surged again on Friday, with West Texas Intermediate topping $65 a barrel, and Brent climbing above $68.

Here’s what leading analysts make of the bold move.

Goldman: Brent Forecast Rises to $80 for Third Quarter

Goldman Sachs Group Inc. raised its second-quarter and third-quarter forecasts for Brent by $5 each to $75 and $80 a barrel, respectively. “Although members discussed Covid demand risks, our takeaway from the press conference is that the discipline of shale producers is likely behind this slower increase in production,” the bank said in a note. The outlook for OPEC+ production over the next six months was trimmed by 900,000 barrels a day.

JPMorgan: ‘Most Bullish Outcome We Could Have Expected’

JPMorgan Chase & Co. expects the OPEC+ decision to open a 1.8 million barrel-a-day deficit over the next three months on restrained supply and rising demand and it raised its Brent forecasts by $2 to $3 a barrel. The move was the “most bullish outcome we could have expected,” analysts including Natasha Kaneva wrote in a note. Saudi Arabia’s calculated bet is that U.S. tight oil will not add output beyond what the bank already expected, it said.

Citigroup: OPEC+ ‘Throws Reality to the Wind’

Oil’s rise will likely increase the strains within OPEC+ as some members will want to pump more to relieve under-pressure economies, Citigroup Inc. said in a report. Top importers including Asian giants China and India would also not be happy, and the alliance is likely to change course at its next meeting, it said. Prices could top $70 before the end of this month, the bank forecast.

Column: OPEC+ keeping output cuts won't surprise the physical crude market | Reuters

Column: OPEC+ keeping output cuts won't surprise the physical crude market | Reuters

The decision by OPEC and its allies to extend crude oil output cuts into April came as something of a surprise to a market expecting some level of increase, but it shouldn’t have.

The problem for the prevailing narrative is that it’s focused on what is happening in the paper crude market, the widely followed and traded Brent and West Texas Intermediate futures.

They have been signalling increasing tightness in the global oil market as the world starts to recover from the economic impact of the coronavirus pandemic, coupled with the ongoing supply restrictions imposed by the producer group, referred to as OPEC+.

The paper market has a point: oil demand does look like it will be heading higher, but the problem is a matter of timing.

The market is priced for a sharp increase in demand right now, and in the next few months.

But the physical crude market is telling another story, with traders there saying there are plenty of cargoes available, especially for delivery to the top-importing region of Asia.

The physical market has largely already sorted out what they are buying for April, and they are now looking more at loading programmes for May and June.

Oil Soars to $65 With #Saudi Supply Gamble Buoying Market Bulls - Bloomberg

Oil Soars to $65 With Saudi Supply Gamble Buoying Market Bulls - Bloomberg

Oil briefly moved above $65 a barrel after OPEC+ chose not to relax supply curbs even as the global economy pulls out of its pandemic-driven slump, confounding widespread expectations the group would loosen the taps.

The surprise decision spurred a wave of crude price forecast upgrades by major banks. The producer alliance agreed to hold output steady in April, while Saudi Arabia said that it will maintain its 1 million barrel-a-day voluntary production cut. West Texas Intermediate rose as much as 1.9% and Brent briefly topped $68.

Crude has soared this year, shepherded higher by OPEC+ restraining supplies and the vaccine-aided recovery in consumption that’s drained inventories. The group’s decision represents a victory for Riyadh, which has advocated for tight curbs to keep prices supported.

Goldman hikes Brent forecast, says 'shale discipline' behind OPEC strategy | Reuters

Goldman hikes Brent forecast, says 'shale discipline' behind OPEC strategy | Reuters

Goldman Sachs Commodities Research raised its Brent forecast for second and third quarter by $5 a barrel after OPEC and its allies kept the deal unchanged, and said ‘discipline of shale producers’ is likely behind the group’s slower output increase.

The Wall Street bank now sees Brent prices at $75 a barrel in second quarter and at $80 a barrel in third quarter of 2021, it said in a note dated Thursday.

U.S. shale producers have quickly responded to oil price gains in recent years, winning market share as Saudi Arabia and other major producers have cut output, although they held back on boosting production since pandemic-led demand destruction last year.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Thursday agreed to extend most oil production cuts until April, after deciding that the demand recovery from the coronavirus pandemic was still fragile.

“OPEC’s supply strategy is working because of its unexpectedness and suddenness,” Goldman said.

“We believe it is now clear that OPEC+ is in fact pursuing a tight oil market strategy, with our updated supply-demand balance pointing to OECD (inventories) falling to their lowest level since 2014 by the end of this year.”

Oil soars to near 14-month high as OPEC+ extends output cuts into April | Reuters

Oil soars to near 14-month high as OPEC+ extends output cuts into April | Reuters

Oil prices jumped more than $1 a barrel on Friday, hitting their highest levels in nearly 14 months, after OPEC and its allies agreed not to increase supply in April as they await a more substantial recovery in demand amid the coronavirus pandemic.

Brent crude futures for May rose to as high as $68 a barrel on Friday, a level not seen since Jan. 8, 2020. The contract was up $1.09, or 1.6%, to $67.83 a barrel at 0730 GMT, and was on track for a near 3% gain in the week.

U.S. West Texas Intermediate (WTI) crude futures climbed 93 cents, or 1.5%, to $64.76 per barrel after hitting a high of $64.94 earlier in the session.

Both contracts surged more than 4% on Thursday after the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, extended oil output curbs into April, granting small exemptions to Russia and Kazakhstan.

“OPEC+ has kept output steady indicating that it wants to take a cautious approach in normalising production,” said Ravindra Rao, vice president, commodities at Kotak Securities.

Saudis Bet ‘Drill, Baby, Drill’ Is Over in Push for Pricier Oil - Bloomberg

Saudis Bet ‘Drill, Baby, Drill’ Is Over in Push for Pricier Oil - Bloomberg

Saudi Arabia just made a high-stakes wager that the glory days of U.S. shale, which transformed the global energy map in the last decade, are never coming back.

By keeping a tight grip on supply at Thursday’s meeting of the OPEC+ alliance of oil producers, Saudi energy minister Prince Abdulaziz bin Salman showed he’s focused on boosting prices -- and confident that this time around it won’t encourage American producers to surge back and steal market share.

“Drill, baby, drill is gone for ever,” said Prince Abdulaziz, who’s orchestrated the revival of the oil market after last year’s catastrophic collapse.

His swagger comes mixed with a good dose of diplomatic tension: Russia, Saudi Arabia’s most important OPEC+ partner, has tried to convince Riyadh for several months to increase output, fearing that rising oil prices would ultimately awaken rival shale producers. The Saudis are certain the American industry has reformed itself.

If the prince is right, OPEC+ will be able to both push prices higher now and recover market share later without worrying rivals in Texas, Oklahoma and North Dakota will flood the market. But if Riyadh has miscalculated -- and it’s got shale wrong before -- the danger will be lower prices and production down the line.