Oil Gains but Price Swings Likely Ahead of OPEC By

© Reuters.

By Barani Krishnan —  Oil prices rose Monday, overcoming a choppy session, but the volatility of the past fortnight is unlikely to disappear at least until the end of this week’s OPEC+ meeting. 

New York-traded , the benchmark for U.S. crude, settled up 59 cents, or 1%, at $61.56. It tumbled as much 2.5% earlier in the day.

London-traded , the global benchmark for crude, finished the session higher by 57 cents, or 0.9%, at $64.35. It fell 2.4% intraday.

Oil managed to close higher despite tumbling earlier in the day on news that Ever Given, the container vessel that blocked the Suez Canal over the past week, had been freed, assuring a return to normalcy eventually for global crude shipments.

“Crude prices should consolidate leading up to the OPEC+ meeting but could settle lower if the strong trend continues,” said Ed Moya, senior markets analyst at New York’s OANDA.

Since April, the 23-nation OPEC+ has withheld between 7 million and 9 million barrels per day of supply from the market. 

Those cuts helped WTI rise from a little under $36 per barrel on Oct. 30 to reach just below $68 by March 8. Brent went from beneath $38 to just above $71 in that same stretch. But over the past fortnight, the two benchmarks have lost about 10% from those highs.

The most critical component of the OPEC+ cuts has been the Saudi portion —  which has accounted for anywhere between 1 million and 2 million barrels per day since April. 

In January, when oil bears were betting on the alliance to hike production amid strengthening signs of demand recovery, the Saudis doubled down with an additional one million-barrel cut for February and March, sending crude prices soaring. Saudi Oil Minister Abdulaziz bin Salman had boasted then that he would make life “hell” for short-sellers in oil.

When OPEC+ met again earlier this month to decide on April production levels, the Saudis again announced a 1 million-barrel cut for next month instead of a production hike. The difference, though, was the tone of Oil Minister Abdulaziz, who seemed genuinely concerned about demand. 

In this week’s meeting for May quotas, the smart money is on the Saudis to try and clamp down on output again.

But some traders think the kingdom will have limited flexibility in surprising the market either way.


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