OPEC+ on Sunday agreed to extend its production cuts for another quarter, but the reaction from oil markets was relatively muted as the agreement had already been priced in.
Early on Monday morning, Brent crude was trading at $83.72, while West Texas Intermediate was sitting at $80 per barrel.
The extension of the 2.2-million-bpd production cuts from OPEC+ was anything but a surprise. Yet making it official at the Sunday meeting sent a clear signal about the course OPEC+ will continue following.
"The decision sends a message of cohesion and confirms that the group is not in a hurry to return supply volumes, supporting the view that when this finally happens, it will be gradual," Jefferies analyst Giacomo Romeo told the Financial Times.
There was one surprise out of Russia, which has said it would deepen its cuts by some 471,000 bpd in the second quarter while easing curbs on exports, to stay within its 500,000 bpd cut quota that covers both production and exports.
"If the Russian cuts are fully implemented additional barrels would be removed from the market. So that is a surprise move no one expected and could lift prices," UBS' Giovanni Staunovo told Reuters.
"The OPEC+ rollover was baked in, it's the Gaza crisis that prices are responding to," Vandana Hari, founder of Vanda Insights, told Bloomberg. "As long as the cease-fire negotiations remain in a stalemate, crude is likely to either hover around current levels or come under further upward pressure."
At the same time, analysts from ANZ said in a note today that signs of supply tightening are also exerting an upward pressure on prices.
"Signs of tightness in the physical market continue to push crude oil higher. Output cuts by the OPEC+ alliance continue to reduce supply as the market worries about the renewed tensions in the Middle East," they said, as quoted by Reuters.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More