Oil set for gains this week ahead of Opec+ meeting

The Saudi-Russia-led alliance will convene for an extraordinary meeting of ministers on March 3

FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo
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Oil is poised for further gains this week ahead of a meeting of Opec+ producers and continued tightening on the market.

Brent, the most widely-used crude benchmark, has risen steadily since the year began, registering gains of about 24 per cent.

The marker rose by about 17 per cent over the past month as disruptions across the US, which affected 4 million barrels per day of oil production due to a winter storm, also helped tighten supply.

West Texas Intermediate, the US benchmark, is now trading above $60 per barrel, up 26 per cent since January. It has registered a gain of 17.5 per cent over the past 30 days.

The continued squeeze on US production, which was about 11 million bpd before the disruptions across Texas and other southern states, has proved to be a boon for oil markets.

Investment banks forecast continued gains for crude amid a persistent commodities supercycle that has driven metals such as copper to nine-year highs.

Both Brent and WTI finished the last week of February down by 2.56 per cent and 3.2 per cent at $64.42 a barrel and $61.50 a barrel, respectively.

However, with fundamentals remaining sound and producers expected to meet later this week, the markers are set for a rebound.

“US crude paused its rally, although the main catalysts of the actual market turmoil, which is the positive economic outlook and expectations of higher spending, are fundamentally supportive of oil prices,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

Brent is poised for long-term gains and expected to rise at its fastest pace since the 1970s over the next three years, according to Bank of America.

The benchmark could hit $100 a barrel, while averaging between $50 and $70 a barrel between now and 2026.

Goldman Sachs is also bullish about Brent, expecting it to surge to $75 a barrel by the third quarter of the year.

“The technical picture for both contracts remains bullish, with overbought indicators easing back towards neutral territory,” said Jeffrey Halley, senior market analyst for the Asia Pacific at Oanda.

Oil markets will also brace for fresh supply to be brought by Opec+ over the next quarter as it eases some of its curbs.

The group, which is holding back 7.2 million bpd of production, was earlier set to add 2 million bpd, which can now be expected.

Saudi Arabia’s sizeable 1 million bpd cut will also expire by the end of March, allowing for incremental increases in output.

The Opec+ alliance will convene for an extraordinary meeting of ministers on Wednesday.

Iran, which has not been able to freely export its barrels, will join a ministerial monitoring committee meeting this week.

The group also has to contend with additional barrels trickling back into global supply chains on the back of a possible easing of US sanctions against Iran and Venezuela.