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Oil hit its highest level in nearly two years in New York City after OPEC + shocked markets with the decision to keep supply limited as the global economy begins to recover from the crisis caused by the pandemic.
U.S. benchmark crude futures topped $ 66 per barrel on March 5, as its global counterpart, Brent, moved closer to the key level of $ 70 per barrel. Aggressive supply management from the producer alliance and continued vaccine rollout around the world have contributed to a remarkable rebound for crude from the depths of the coronavirus fallout. OPEC + ‘s surprise decision on March 4 to keep production stable in April accelerated these price increases, prompting a wave of revaluation of oil price forecasts by the big banks and a surge in market structure.
“In some ways even more important than the lack of oil was the accompanying message: they don’t really care about the price, or the squeeze,” said Paul Horsnell, head of commodities research. at Standard Chartered. “In the short term, certainly until the April meeting, the market can go anywhere it wants. The door is wide open for prices over $ 70. “
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Crude in New York has climbed more than 35% so far this year, setting multi-year highs with the restriction on OPEC + production holding the market until a full-fledged return in consumption. The group’s latest move represents a victory for Riyadh, which has argued for tight borders to keep prices strong.
“Overall, this was the most optimistic result we could have expected,” JPMorgan Chase & Co. analysts, including Natasha Kaneva, wrote in a note to clients.
The Organization of the Petroleum Exporting Countries and its allies, including Russia, had debated whether to restore up to 1.5 million barrels per day of production. As part of the March 4 deal, Russia and Kazakhstan were granted exemptions, which allowed them to increase supply slightly in April.
Saudi Arabia’s bold and unexpected gamble to restrict production hinges on its view that higher prices this time around will not lead to a large increase in output from U.S. shale drillers. Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview after the meeting that shale companies are now more focused on dividends.
West Texas Intermediate for April delivery advanced $ 2.26 to $ 66.09 per barrel, the highest level since April 2019.
Brent for the May settlement climbed $ 2.62 to end the session at $ 69.36 a barrel.
The rebound in oil this year should intensify the debate on a possible resurgence of inflation and make it harder for the Federal Reserve to support the US recovery. The Treasury market is already looking for signs of faster price gains, with yields rising rapidly.
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