OPEC + is considering maintaining its oil production cuts in April. Given the still-fragile recovery in global demand, three OPEC+ sources revealed to Reuters on Wednesday. Oil futures are up more than 2%, driven by this possible surprise, as an increase in production of 500,000 barrels was expected.
OPEC and its allies, led by Russia, maintain cuts of around 7 million barrels per day. This is to help the market rebalance and stop prices from falling after the pandemic shock. The top OPEC producer and the world’s leading exporter, Saudi Arabia, is also cutting 1 million BPD in February and March in addition to its initial quota.
The West Texas Intermediate opened the day today with an increase of 2% to $60.95 a barrel. It marked the maximum of the day at $61.99. Meanwhile, Brent is trading with a rise of 2.2% and exceeds $64 per barrel.
Investors had expected the big producers to decide to relax their cuts at their ministerial meeting on Thursday and increase supply between March and April. However, it no longer seems so certain.
Experts point out that optimism about the COVID-19 vaccination campaign and the hope that the US will return to normal soon influences the market this Wednesday, but they are cautious.
Investors are confused by the increase in US crude oil reserves.
On the other hand, the American Petroleum Institute reported an increase of 7.4 million barrels in the week ended February 26. That amount contrasts with the decline of 1.8 billion expected by the market.
This advance in reserves collides head-on with the historic fall in gasoline inventories by 9.99 million barrels and the decline of 9.05 million barrels in distilled products’ inventories. It has been the most significant contraction since January 2003.
These numbers have left investors somewhat disconcerted, who have not known how to interpret the increase in crude oil reserves.
However, these figures coincide with the stoppages caused by the winter storm. It affected the southern United States and forced refineries and energy companies to reduce their capacity.
Crude oil found support at its 20-day SMA after breaking lower from the late February swing high. The recently overtaken 23.6% Fibonacci retracement level may give support on a downside move.
However, a break below the Fib level would bring the 20-day SMA back into focus. The Relative Strength Index (RSI) is trending somewhat higher towards the overbought 70 level.