Oil prices rose on Friday 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, the marker under which two-thirds of global crude is traded, surged 1.03 per cent to reach $67.43 per barrel at 9:55am UAE time. West Texas Intermediate, which tracks US crude grades, was up 0.99 per cent at $64.46 per barrel.
During a virtual meeting on Thursday, the 23-member Opec+ group decided to extend 7.2 million barrels per day of oil output curbs into April, with small exemptions to Russia and Kazakhstan.
Saudi Arabia, which leads the alliance along side Russia, also decided to extend its outsized voluntary cut of 1m bpd until end of April.
The development was “a big surprise as market participants had expected an increase of 1.5m bpd, with 500,000 bpd coming from Opec+ and 1m bpd from Saudi Arabia, ending its voluntary one-off cut for February and March,” Giovanni Staunovo, commodity analyst at UBS, said.
He expects oil inventories to fall at a fast pace in April following the decision.
“That tightness will support oil prices, and hence we raise our second half 21 forecasts by $7 per barrel, expecting Brent to trade at $75 per barrel and WTI at $72 per barrel.”
US shale oil production is also expected to increase as oil prices surge due to output curbs by Opec+ countries, according to Stephen Innes, chief global market strategist at Axi.
“This continued cautious approach raises the likelihood of Brent settling above $70 per barrel, but more clearly in second half."
There could also be a "potential supply response from the US oil sector, which has been committed to capital discipline and limited increases in output. rather than second quarter," he added.
