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 CL.1, 1.30% CLK21, 1.18% rose $1.06, or 1.8%, to $60.22 a barrel on the New York Mercantile Exchange. June Brent crude BRN00, 0.41% BRNM21, 0.45%, 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.