Oil futures moved up toward session highs on Thursday after the Organization of the Petroleum Exporting Countries and its allies officially announced an agreement to gradually lift output starting in May.
The group of producers, together known as OPEC+ announced that they have approved an adjustment to the production levels for May, June and July.
During a press conference, Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman said OPEC+ will raise daily oil production by 350,000 barrels in May, 350,000 barrels in June and by 441,000 barrels in July.
He also said Saudi Arabia will gradually roll back the voluntary 1 million-barrel per day cut it’s had in place since January, easing the per-day reduction by 250,000 barrels in May, by 350,000 barrels in June and by 400,000 barrels in July.
Phil Flynn, senior market analyst at The Price Futures Group said that he expected producers to raise production levels, but “did not expect that they would announce it now, especially after lowering the demand outlook.”
“While OPEC is acknowledging that the world will need more oil as the U.S. reopens, the increases they are talking about are very modest so if demand bounces back, the market will still be tight,” he said.
West Texas Intermediate crude for May delivery
the global benchmark, was up $1.22, or 1.9%, at $63.96 a barrel on ICE Futures Europe, after earlier topping $64.
Both crude benchmarks ended Wednesday with a monthly loss of close to 4%.
As OPEC+ went into this meeting, the physical oil market was “well supplied,” said Ann-Louise Hittle, vice president Macro Oils, at Wood Mackenzie, ahead of OPEC+ announcement. “However, that will shift over this quarter when we expect total demand to outpace supply.”
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.
Those comments had fed expectations that OPEC+ would leave production cuts in place.
U.S. Energy Secretary Jennifer Granholm late Wednesday tweeted that she had talked with Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud and had “reaffirmed the importance of international cooperation to ensure affordable and reliable sources of energy for consumers.”
Perhaps the talks between Granholm and Prince Abdulaziz bin Salman on Wednesday “inspired Saudi Arabia and OPEC+ to be more nuanced,” said Flynn.
May natural gas
rose 1.5% to $2.65 per million British thermal units.
The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 14 billion cubic feet for the week ended March 26. That compares with an average increase of 19 billion cubic feet forecast by analysts polled by S&P Global Platts. The data also included upward revisions to the previous week’s stocks in the South Central region.