By Adedapo Adesanya
The prices of crude oil grades jumped more than 3 per cent to a five-week high on Friday, lifted again by the decision by the Organisation of the Petroleum Exporting Countries and allies (OPEC+) this week to make its largest supply cut since 2020.
Brent futures rose $3.50 or 3.7 per cent to settle at $97.92 a barrel as the United States West Texas Intermediate (WTI) crude rose $4.19 or 4.7 per cent to end at $92.64 per barrel.
That was the highest weekly close for Brent since August 30 and WTI since August 29. The price jump pushed both benchmarks into technically overbought territory for the first time since August for Brent and June for WTI.
Both contracts also posted their second straight weekly gains and their biggest weekly percentage gains since March this week, with Brent up about 11 per cent and WTI by 17 per cent.
OPEC+ agreed this week to lower their output target by 2 million barrels per day.
While OPEC+ moved to slash production by that large margin starting next month, the realised production losses will likely be closer to 1 million barrels per day because many OPEC+ members are currently producing below the new targets.
Analysts noted that even a 1 million barrels per day increase at a time when SPR releases are soon expected to end is substantial and has the power to raise prices.
The actual cut in OPEC+ production could be much smaller, considering that the alliance is estimated to be around 3.6 million barrels per day below its target production.
This comes ahead of a European Union embargo on Russian oil and will squeeze supply in an already tight market. read more
OPEC Secretary General, Mr Haitham al-Ghais, said the output target cuts would leave the alliance with more supply to tap in crises.
In response, US President Joe Biden expressed disappointment over the OPEC+ plans. He and US officials said the world’s largest oil-producing country was looking at all possible alternatives to keep prices from rising.
However, the US oil rig count, an early indicator of future production, fell by two this week to 602, as high inflation forces producers to spend more money to secure workers and equipment.
