(Bloomberg) – Oil retreated after OPEC + decided to increase production in the three months to July and the numbers showed that coronavirus infections in India reached a record high, highlighting the risks to energy demand in one of the main importers in India. Asia.
West Texas Intermediate fell 0.9%, reducing the 3.9% gain seen on Thursday, when the alliance agreed to gradually loosen its supply brakes. The group will increase production by an additional 1 million barrels per day in stages between May and July and, in the same period, Saudi Arabia will reduce its voluntary reduction of 1 million barrels per day. The markets were closed on Friday because of a holiday.
Crude oil has made an impressive recovery this year as the launch of coronavirus vaccines paves the way for the reopening of important economies, and the decision by the Organization of Petroleum Exporting Countries and its allies was seen as a vote of confidence in the perspectives. Reinforcing the signs that some important regions are steadily recovering, the US created more than 900,000 jobs in March. While this bodes well for oil demand, significant risks – such as the increase in Indian cases – attest to a complex and multifaceted global picture.
Prior to Thursday’s meeting, the OPEC + cartel was expected to maintain its cautious stance, rolling out the cuts that applied to most countries, although Russia had received a raise at the previous meeting. Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said that OPEC + is now “testing” the market and can reverse the course, if necessary, at the next session on April 28.
“The reduction in OPEC + was more of a commitment than its confidence in the market recovery,” said Vandana Hari, founder of Vanda Insights in Singapore. “Another rollover – with another round of layoff for Russia – may have undermined cohesion in the alliance.”
After the OPEC + meeting, Saudi Arabia raised shipment prices to Asia. Saudi Aramco, a state-owned energy company, will increase its ratings for the region in May by 20 to 50 cents a barrel. Most prices for northwest European customers will not change, while most specifications for the U.S. will be cut by 10 cents.
Goldman Sachs Group Inc. remains optimistic. Even after OPEC +’s decision to bring back supply, “much more” production was still needed during the summer, the bank said in an April 1 report, describing the recent price weakness as “transitory”.
Progress in combating the pandemic remains mixed. An accelerated rate of vaccinations in the United States and China contrasts with setbacks elsewhere. In France, cases have increased due to more contagious variants, forcing a third block. In India, infections have increased to over 100,000 in the past 24 hours, and the Mumbai authorities have asked all private offices to work from home.
“Crude oil may be at an impasse for now, waiting for new leads in demand,” said Hari. “I expect a continuous tug of war over the sentiment between a Europe in confinement and the United States running towards freedom.”
Brent’s distribution time was 35 cents late. This is a bullish pattern – with short-term prices being traded at a premium over the most distant – and rose 6 cents last Monday.
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