By Barani Krishnan
Investing.com — Oil prices swung from green to red and back on Thursday as traders sought to put a finger on oil demand from next month, after OPEC+ reportedly agreed to gradual increases in production for May through July.
Members of the 23-nation oil producing alliance, meeting via a two-day video hook-up, agreed to raising output by 350,000 barrels per day in May and June, and 400,000 bpd in July, according to sources with knowledge of the matter.
Earlier, Saudi Arabia was reportedly considering resuming 250,000 barrels per day of cuts on its own in May, followed by another 250,000 bpd in June, to provide continued support to the market.
The conflicting reports sent oil prices all over the place, from an initial rally of more than $2 a barrel on the day to a drop of nearly $1 at one point.
By 11:35 AM ET (15:35 GMT), London-traded , the global benchmark for crude, was up 37 cents, or 0.6%, to $63.11. It catapulted to as high as $64.81 earlier and sunk to a session low of $62.45.
New York-traded , the benchmark for U.S. crude, was up 54 cents, or almost 1%, to $59.70 per barrel. WTI’s intraday high was $61.17 versus a low of $58.88.
Since April last year, the 23-nation OPEC+ — made up of the 13-member Saudi-led OPEC, or Organization of the Petroleum Exporting Countries, and 10 non-OPEC nations steered by Russia — has withheld at least 7.0 million barrels per day of supply from the market.
Those cuts helped WTI rise from a little under $36 per barrel on Oct. 30 to just below $68 by March 8. Brent went from beneath $38 to just above $71 in that same stretch. But over the past fortnight, the two benchmarks have lost about 10% from those highs.
Russian Deputy Prime Minister Alexander Novak told Thursday’s OPEC+ meeting that global oil demand was anticipated around 5.0- 5.5 million bpd this year.
But while the alliance’s production cuts had slashed much of the Covid-19 related oil glut seen from March 2020, oil stocks remained above the 2015-2019 level, an OPEC+ document circulated at the meeting said.
The rollout of coronavirus vaccines and supply curbs had underpinned the market’s rally of the past four months. But that’s fraying now on concerns that near-term consumption was at risk, particularly in Europe where France has announced a new month-long lockdown.
Mohammad Barkindo, secretary-general of the Organization of Petroleum Exporting Countries, pointed this week to the market’s recent volatility as “a reminder of the fragility facing economies and oil demand.”
“A decision to delay an easing in current levels of production restraint would increase the tightness in the second-quarter and potentially boost prices ahead of the peak summer demand season,” Ann-Louise Hittle, vice president for macro oils at Wood Mackenzie, told Bloomberg.