Oil prices rose for a fourth straight month, despite their heavy plunge at the last trading session of the month.
British-based oil contract, Brent crude, which is the international benchmark for oil, settled at $64.42, down 3.7% on the day. For the week, it however rallied up by 2.5%. For the month, it was up 15%, extending gains in January, 9% in December, and 27% in November.
- Brent crude also hit a 13-month high of $66.81 in February. Oil traders will now be looking at the all-important meeting led by the Organization of Petroleum Exporting Countries with allies steered by Russia, which is to meet in the coming days to set output quotas for April.
- The Saudis had contributed massively in supporting crude oil prices last month when they pledged to make these extra curbs only this month and March, but some see signs that suggest a change in such status quo.
Saudi Arabia, the leading oil producer after the United States, is OPEC’s most important producer as it has proven reserves equivalent to 221.2 times its annual needs. This means that, without Net Exports, there would be about 221 years of oil left.
That said, OPEC has 70% of the world’s proved crude oil reserves. Venezuela leads the title for the highest crude oil reserves with 304 billion barrels, followed by Saudi Arabia with 298 billion barrels.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave insightful macros that could weigh on oil prices in the short term.
“Stronger US dollar, especially against Asia EM and higher bond yields, lead to the selling of long-duration assets. And given the massive overweight of “long duration, infinite growth tech” at the index level, stocks are capitulating.
“And the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility.
“Next week’s OPEC+ meeting has more potential to be damaging than a positive catalyst given the optimism now priced into oil and the likelihood the group takes steps that could prompt a round of profit-taking,” Innes stated.
What to expect
Still, oil traders anticipate such corrections are likely to be short-lived given evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.