According to Dmitry Marinchenko, the head of the group for natural resources and commodities at Fitch, OPEC's decision on oil production was unexpectedly conservative for the market. This would force oil prices to remain around $60– $70 per barrel, he stressed.
On Tuesday, March 9, the OPEC+ countries agreed to keep oil output levels broadly unchanged in April 2021, while allowing Russia and Kazakhstan to raise output at a modest amount. However, the market expected a substantial increase in production, Fitch noted. As a result, oil prices surged by 5%. Moreover, their rally is still ongoing. Thus, Brent crude futures for May climbed to $67.41 per barrel, and WTI crude futures for April settled at $64.44 per barrel.
OPEC’s decision turned out to be conservative, and excess oil inventories would be used up faster due to a noticeable deficit in the market, the Fitch spokesman said. Marinchenko believes that in the second half of 2021, the dynamics of oil prices will depend on the group's crude production rates.
Notably, after demand collapsed amid the COVID-19 pandemic, the OPEC+ members agreed to cut output by a record 9.7 million barrels per day. As demand recovered, the restrictions were adjusted. By March 2021, production cuts amounted to 7.05 million barrels per day.
