OPEC+ confirmed its plans to extend the pause on crude oil production hikes to March this year, citing “healthy oil market fundamentals as reflected in low inventories.”
In a press release late Sunday, OPEC+ said that “the 1.65 million barrels per day may be returned in part or in full subject to evolving market conditions and in a gradual manner.”
The announcement comes as no surprise, after the producer group indicated earlier this month it saw no need to add to global oil supply right now, not least because the first quarter of the year is normally the weakest for oil demand growth.
That and the repeated warnings of an oversupply—which OPEC+ disagrees with—prompted the decision that involves eight member countries of OPEC+, including Saudi Arabia, Russia, Iraq, the UAE, Algeria, Kazakhstan, Oman, and Kuwait.
The decision also comes despite a recent jump in oil prices, with Brent crude briefly topping $70 per barrel last week on the prospect of a U.S. strike on Iran. Oil prices began the week with a more-than 5% drop, though, following remarks made by President Trump over the weekend about Iran being ready to negotiate with the U.S. on its nuclear program, which was taken as a signal for de-escalation of the situation.
Iran was “seriously talking”, Trump told the media, as quoted by Reuters. Meanwhile, Tehran’s head of security, Ali Larijani, said the Iranian government was making arrangements for talks with the United States, reinforcing the perception of de-escalating tensions.
While geopolitics remains a source of oil price volatility, some analysts are beginning to question the glut story. ING’s Warren Patterson and Ewa Manthey wrote in a note last week that “The strength in the timespreads is at odds with expectations of a large surplus. The forward curve has moved deeper into backwardation this month, with the curve backwardated all the way through to the Aug-27 contract.”
By Irina Slav for Oilprice.com
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