By Myra P. Saefong and William Watts
Oil futures gained more than 3% on Thursday after the Organization of the Petroleum Exporting Countries and its allies officially announced an agreement to gradually lift output starting in May.
The group of producers, together known as OPEC+ announced that (link) they approved an adjustment to the production levels for May, June and July.
During a press conference, Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman said OPEC+ will raise daily oil production by 350,000 barrels in May, 350,000 barrels in June and by 441,000 barrels in July.
He also said Saudi Arabia will gradually roll back the voluntary 1 million-barrel per day cut it's had in place since January, easing the per-day reduction by 250,000 barrels in May, by 350,000 barrels in June and by 400,000 barrels in July.
Phil Flynn, senior market analyst at The Price Futures Group said that he expected producers to raise production levels, but "did not expect that they would announce it now, especially after lowering the demand outlook."
"While OPEC is acknowledging that the world will need more oil as the U.S. reopens, the increases they are talking about are very modest so if demand bounces back, the market will still be tight," he said.
Read:Why oil prices rallied after OPEC+ said it will gradually raise production (link)
West Texas Intermediate crude for May delivery rose $2.29, or 3.9%, to settle at $61.45 a barrel on the New York Mercantile Exchange after trading as high as $61.75 in the wake of the producers' decision. June Brent crude , the global benchmark, added $2.12, or 3.4%, at $64.86 a barrel on ICE Futures Europe, after taping an intraday high of $65.
Markets will be closed for Good Friday. For the week, based on the front-month contracts, WTI prices rose 0.8% and Brent crude climbed 0.7%, according to Dow Jones Market Data.
Both crude benchmarks ended Wednesday with a monthly loss of close to 4%.
The OPEC+ move "looks appropriate to me and the markets given the potential for a very strong U.S. GDP print the rest of the year," said Arnim Holzer, macro and correlation defense strategist with EAB Investment Group, in emailed comments. The response in the oil market looks to "be encouraged that some discipline remains, but not at a strangling level."
In opening remarks at the OPEC+ meeting Thursday (link), Prince Abdulaziz said that "the reality remains that the global picture is far from even, and the recovery is far from complete."
"On the supply side, we have continued to play our part," he said. "Compliance with the levels we agreed has -- once again -- been impressive," with new aggregate levels set at 113%. But "we have to approach the coming weeks with the same admirable commitment."
"Until evidence of the recovery is undeniable, we should maintain this cautious stance," Prince Abdulaziz said.
Those comments had fed expectations that OPEC+ would leave production cuts in place.
U.S. Energy Secretary Jennifer Granholm late Wednesday tweeted that she had talked with Prince Abdulaziz and had "reaffirmed the importance of international cooperation to ensure affordable and reliable sources of energy for consumers."
Perhaps the talks between Granholm and Prince Abdulaziz bin Salman on Wednesday "inspired Saudi Arabia and OPEC+ to be more nuanced," said Flynn.
Petroleum-product futures tracked moves in oil prices Thursday. May gasoline tacked on 3.2% to $2.02 a gallon and May heating oil added 3.5% to $1.83 a gallon.
May natural gas rose 1.2% to $2.64 per million British thermal units.
The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose (link) by 14 billion cubic feet for the week ended March 26. That compares with an average increase of 19 billion cubic feet forecast by analysts polled by S&P Global Platts. The data also included upward revisions to the previous week's stocks in the South Central region.
-Myra P. Saefong; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
04-01-21 1511ETCopyright (c) 2021 Dow Jones & Company, Inc.