Oil prices climb as OPEC puts further supply cuts on the table

Saket Sundria and Alex Longley March 03, 2021
OPEC Secretary-General Mohammad Barkindo
OPEC Secretary-General Mohammad Barkindo

(Bloomberg) --Oil climbed ahead of a crucial OPEC+ meeting, as the alliance was expected to agree a coordinated increase in output as the pandemic’s impact on the market recedes.

Brent futures rose 1.5% after three consecutive days of losses for the first time since December. The widespread view among the Organization of Petroleum Exporting Countries and its allies is that the oil market can absorb extra barrels, according to people familiar with the matter.

Oil has staged a powerful rally this year, driven by significant OPEC+ curbs -- including unilateral cuts by Saudi Arabia -- and a vaccine-aided rebound in demand. That strength has paved the way for the alliance to unleash some barrels, with OPEC Secretary-General Mohammad Barkindo saying on Tuesday that both the wider economic outlook and oil-market fundamentals continue to improve. The group could return the bulk of the 1.5 million barrel-a-day hike that’s up for debate.

“The question is not ‘if’ but rather ‘by how much’ the petro-nations will ease supply curbs,” said Norbert Ruecker, an analyst at Julius Baer Group Ltd. “The economic recovery and the likely leisure and travel activity bounce will fuel oil demand and extra supplies will be needed to avoid an overtightening.”


  • West Texas Intermediate for April delivery gained 1.4% to $60.59 a barrel at 10:16 a.m. in London.
  • Brent for May settlement was 1.5% higher at $63.62 a barrel.

There are two parts to the production rise that OPEC+ will discuss. The first is whether the cartel will proceed with a 500,000 barrel-a-day collective hike in April. The second is the question of how Saudi Arabia could phase out its extra reduction of 1 million barrels a day.

The gathering pace of recovery presents “the perfect opportunity for OPEC+ to raise production,” Australia & New Zealand Banking Group Ltd. said in a note, predicting that the group will agree to add 750,000 barrels per day.

Bulls may draw comfort from further signs of shrinking stockpiles in Europe. Crude inventories in the key ARA hub fell to their lowest level since May, according to Genscape.

Still, U.S. crude inventories rose more than 7 million barrels last week, the American Petroleum Institute reported, according to people familiar. If confirmed by the official tally, that would be the largest weekly build since December. The API figures also showed drops in gasoline and distillates.

The market’s structure has also wobbled in recent days, indicating that extreme market tightness may be easing. Brent’s prompt timespread traded as low as 45 cents on Monday, down from 73 cents earlier in the week.

Related news:

  • Iran is reaching out to its old customers in Asia to gauge interest in its crude as the Persian Gulf oil producer ramps up diplomacy in a bid to get U.S. sanctions lifted.
  • Exxon Mobil Corp. expects to cut about 300 jobs in the Asian oil-trading hub of Singapore by the end of 2021, part of a global retrenchment that was announced last year.
  • There’s a rarely-seen buyer in town and Asian oil traders are taking notice: U.S. refiners have started showing interest in medium-quality crude from Asia such as Sokol and ESPO.
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