Thanks to continued tightening in the markets, oil is set to make further gains this week ahead of a meeting of OPEC+ (Organization of the Petroleum Exporting Countries) producers.
Brent, the most widely-used crude commodity benchmark, has risen steadily since the beginning of the year, registering a gain of nearly 24 percent since January. The marker climbed nearly 17 percent over the past month as outages across the US, which shut off 4 million barrels per day of production due to an unprecedented winter storm, further helped tighten the market.
West Texas Intermediate (WTI), the US gauge, is now trading above $60 per barrel levels, up 26 percent since January, and rising 17.5 percent over the past 30 days.
The continued tightening on US production, which was around 11 million barrels per day (bpd) prior to the outages across US has proven good for the oil markets.
Both Brent and WTI finished the final week of February down 2.56 percent and 3.20 percent at $64.42 per barrel and $61.5 per barrel, respectively. However, with the producers expected to meet later this week, the markers are set for a rebound.
“US crude paused its rally, although the main catalysts of the actual market turmoil, which is the positive economic outlook and expectations of higher spending, are fundamentally supportive of oil prices,” said analysts.
Brent is set for longer-term gains as the benchmark is expected to rise at its fastest pace since the 1970s over the next three years, according to Bank of America. The benchmark could climb as high as $100 per barrel, while averaging between $50 and $70 per barrel between now and 2026.
The American financial services company Goldman Sachs is also bullish on Brent, expecting the benchmark to surge to $75 per barrel by the third quarter of the year. “The technical picture for both contracts remains bullish, with overbought indicators easing back towards neutral territory,” said Jeffrey Halley, a senior market analyst.
Oil markets will also prepare for fresh supply to be brought over the next quarter by the OPEC+ group, which is set to ease some of its curbs. The group, which is holding back 7.2 million bpd of production, was earlier set to add 2 million bpd, which can now be expected. Saudi Arabia’s sizable 1 million bpd cut will also expire by the end of March, allowing for incremental increases in output.
The OPEC+ alliance will convene for an extraordinary meeting of ministers on March 3.