Following hectic trade movements all day on Thursday, oil prices settled with gains of more than 3 percent for the day, after OPEC+ signaled with its latest oil production decision that it believes in the global oil demand recovery through the summer.
WTI Crude prices settled at $61.45 at the end of trading on Thursday, up by 3.87 percent. Brent Crude finished trade at $64.86, up by 3.38 percent, before the markets closed for Good Friday.
Traders and analysts were again somewhat caught by surprise by the OPEC+ meeting, although the group's decision was not as shocking as last month's agreement to basically roll over the cuts into April. Back then in early March, the market and analysts were of the opinion that the alliance and Saudi Arabia specifically were going for overtightening the market with a bet that U.S. oil producers would not rush to boost drilling.
At this month's meeting, however, OPEC+ decided to gradually increase collective oil production by over 1 million barrels per day (bpd) over the next three months. The group will be raising its production by 350,000 bpd in each of May and June and by more than 400,000 bpd in July. Additionally, Saudi Arabia will also gradually ease its extra unilateral cut of 1 million bpd over the course of the next few months, beginning with monthly production increases of 250,000 bpd in each of May and June.
Although the initial knee-jerk reaction to the outcome of the OPEC+ meeting on Thursday was heavy selling in oil because additional supply is coming, prices finished strong with more than 3-percent gains as the market realized that OPEC+ expects strengthening of oil demand with its decision to put more crude on the market.
"The agreement is supportive of oil prices, yet should also help avoid a sharp spike upward as oil demand picks up," Ann-Louise Hittle, vice president of macro oils at Wood Mackenzie, said in a note, as carried by Bloomberg.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More