Oil prices extended Thursday’s 5-percent gain into Friday, with both benchmarks rallying by another 3 percent on Friday morning in the wake of the OPEC+ decision to leave production levels unchanged through April.
As of 9:38 a.m. ET on Friday, WTI Crude had jumped above the $65 a barrel mark with prices up by 3.04% at $65.78. Brent Crude was approaching $69 per barrel, with prices up 3.24% on the day at $68.90.
Oil prices continued to rally on Friday, following the 5-percent surge from Thursday as a reaction to the unexpected decision of the OPEC+ group to extend the current level of cuts in April, contrary to market expectations.
On Thursday, the OPEC+ alliance decided to keep their collective oil production unchanged in April, with the exception of Russia boosting output by 130,000 bpd and Kazakhstan by 20,000 bpd.
Saudi Arabia will also keep its extra 1-million-bpd cut through April, the group decided in a move that surprised the market, which had largely expected an increase in OPEC+ production levels and the Saudis reversing the additional cut.
“OPEC+ decided to tighten the oil market further by deferring a planned production increase, basically gambling that US shale producers are more focused on dividends than increasing production,” Saxo Bank said on Friday, commenting on the oil price moves.
Most publicly-traded U.S. shale firms continue to vow strict capital discipline, but there is a group of shale producers – smaller privately held firms – who could spoil the OPEC+ plans for oil market management again, producing more than the market and forecasters currently expect.
The OPEC+ surprise is also seen by Goldman Sachs as a clear sign that the group is pursuing a tight oil market strategy. Following the rollover of the OPEC+ cuts into April, Goldman lifted its Q2 and Q3 oil price forecasts, expecting Brent to hit $80 a barrel in the third quarter this year.
By Tsvetana Paraskova for Oilprice.com
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