Oil was mixed Friday morning in Asia, with investors digesting the Organization of Petroleum Exporting Countries and its allies (OPEC+) ‘s decision to keep supply curbs steady.
Brent oil futures inched down 0.19% to $66.84 by 8:52 PM ET (1:52 AM GMT), after hurtling past the $67 mark earlier in the session. WTI Futures were up 0.23% to $63.98, recording its highest close since April 2019.
The cartel approved the continuation of current production levels for April at its ministerial meeting on Thursday, going against wide expectations that it would relax the curbs. Meanwhile, Russia and Kazakhstan won exemptions from the curbs.
The next OPEC+ meeting will take place on Apr. 1, where may production levels will be discussed.
Top oil exporter Saudi Arabia also pledged to maintain its 1 million barrel-a-day voluntary production cut, with Saudi Energy Minister Prince Abdulaziz bin Salman continuing to urge caution. He argued that erring on the side of caution would be better than a badly timed supply increase, RBC Capital Markets said in a note.
The decision appears to be a victory for Saudi Arabia, which advocated keeping the supply cuts to support prices. However, there are increasing worries that the rally in crude oil prices, thanks to OPEC+ supply cuts and global COVID-19 vaccine rollouts, could lead to increased drilling activity by U.S. shale explorers and increase global inflation.
However, the RBC Capital note also added that reviving shale production does not appear to be a principal concern.
On the fuel demand part, investors were cheered by signs of a resurgence in demand, especially in Asia. China reported that gasoline and diesel consumption extended its run above pre-COVID-19 levels in 2021, as factory activity returned at a faster pace than expected and an infrastructure building program accelerated following February’s Lunar New Year holiday.
In addition to the shockwaves from the OPEC+ decision, investors are also looking to China’s National People’s Congress, where the country’s new five-year plan will be unveiled. The country set a conservative economic growth target of above 6% for 2021, below economists’ forecast, and outlined ongoing fiscal support with prudent monetary policy as the congress opened earlier in the day.