Crude oil prices continued their climb on Friday, poised for a weekly gain of more than 6% as Saudi Arabia took decisive action to voluntarily—and singlehandedly—curb production by an additional million dollars per barrel in hopes of stabilizing the oil markets.
WTI closed out last week at $48.52 per barrel. This week, WTI crude is up 1.38% on the day at $51.55 per barrel—a gain of $3 or more than 6% since last Friday.
Brent crude closed out last week at $51.80 per barrel. This week, Brent is up 1.80% on the day at $55.36 per barrel—a gain of more than $3.50 on the week or nearly 7% since last Friday.
Typically, these OPEC shockers, while meaningful, fail to bolster prices for more than a day, particularly given the striking demand destruction courtesy of the pandemic and the associated lockdowns and travel restrictions. But Saudi Arabia, desperate for Saudi Aramco’s revenues, went beyond what the market had anticipated.
In addition to Saudi Arabia’s extra production cuts, U.S. Democrats gained an advantage in the Senate this week after a hard-fought race in Georgia gave two more seats to their party. This shift of power likely means, according to analysts, that President Donald Trump’s call for $2,000 stimulus payments—as opposed to the $600 that is currently being issued—will become a reality, and soon. The hope is that this round of stimulus payments will increase activity and therefore, increase oil demand.
Meanwhile, the vaccine rollout continues to have some effect on oil prices, but the rollout is slower than many had estimated, and it is unlikely that the vaccine will have any meaningful effect on oil demand until the third or fourth quarter of this year.
By Julianne Geiger for Oilprice.com
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