Saudi Arabia’s Drop in Production Benefits Oil Prices
Oil prices rose sharply on Monday, posting their largest single-session increase in three weeks, propelled by the entry into force of a further cut in Saudi production.
A barrel of North Sea Brent for April delivery, which is the first day of use as a benchmark contract, gained $ 1.31 or + 2.38% from Friday’s close, at $ 56.35.
WTI’s US barrel for the same month climbed $ 1.35 or + 2.58% to $ 53.55.
“Oil started the week with a positive sentiment” which is explained both by the evolution of Saudi production, but also by the decline in US oil stocks, a trend “which could continue”, indicated Louise Dickson, of Rystad Energy. This “demonstrates a healthy level of demand relative to supply,” she said.
For Stephen Innes, analyst at Axi, the market has especially welcomed “the entry into force (Monday) of the voluntary (further) cuts in Saudi Arabia’s production, announced in January”.
The leader of the Organization of the Petroleum Exporting Countries (OPEC) had announced earlier this year that it would start its own production quota in February and March, to the tune of one million barrels per day.
At the same time, the other members of the OPEC + alliance, made up of the cartel and their ten allies, kept their production unchanged for the period, except for Russia and Kazakhstan, which will marginally increase their extractions.
Participants from the twenty-three club meet on Wednesday for a follow-up committee on the group’s current production reduction agreement, identified by the acronym JMMC.
Investors “also hope that oil prices will continue to rise as the vaccine rollout continues,” said Naeem Aslam of Avatrade, although the process remains “very unstable and slow.”
The European Union in particular is criticized for the slowness of vaccinations against COVID-19 and travel restrictions, which are very damaging to the consumption of black gold, are increasing around the world in an attempt to stem the pandemic.
Saudi Arabia's Drop in Production Benefits Oil Prices - /10