Oil rallied to the highest in nearly two years in New York after OPEC+ shocked markets with a decision to keep supply limited as the global economy starts to recover from a COVID-19 pandemic-driven slump.
US benchmark crude futures topped US$66 a barrel on Friday, while its global counterpart Brent neared the key US$70 level.
West Texas Intermediate for April delivery on Friday rose US$2.26 to US$66.09 a barrel, up 7.5 percent for the week.
Brent crude oil for May delivery on Friday rose US$2.62 to US$69.36 a barrel, up 4.9 percent weekly.
The supply curbs and the rollout of COVID-19 vaccines have aided a stellar rebound for crude from the depths of the coronavirus-related fallout.
The surprise decision by OPEC+ on Thursday to keep output steady next month boosted prices further and led to strength in the market’s structure.
Major banks upgraded price forecasts, with some calls for oil reaching north of US$100 next year.
“In some ways, even more important than the lack of oil was the message that came with it: They’re not really worried about price, not worried about tightening,” Standard Chartered PLC head of commodities research Paul Horsnell said. “The door is wide open to prices beyond US$70.”
Crude has soared more than 30 percent so far this year, with OPEC+’s output restraint holding the market over until a full-fledged comeback in consumption.
The group’s latest decision represents a victory for Riyadh, which has advocated for tight curbs to keep prices supported.
“Overall, this was the most bullish outcome we could have expected,” JPMorgan Chase & Co analysts, including Natasha Kaneva, wrote in a note to clients.
Saudi Arabia’s bold and unexpected gamble to restrain production is founded upon its view that this time around higher prices would not lead to a big increase in output by US shale drillers.
Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said in an interview after the meeting that shale companies were now more focused on dividends.
Oil’s rebound this year stands to intensify the debate about a potential resurgence in inflation, and complicate the task facing the US Federal Reserve as it supports the US recovery. The Treasury market is already looking for signs of faster price gains, with yields rising rapidly. Meanwhile, US employers last month added more jobs than forecast.
Goldman Sachs Group Inc raised its Brent forecasts by US$5 a barrel and now sees the global crude benchmark at US$80 in the third quarter of this year.
JPMorgan increased its Brent projection by US$2 to US$3 a barrel and Australia & New Zealand Banking Group Ltd boosted its three-month target to US$70. Citigroup Inc said crude could top US$70 before the end of this month.
Oil rising to these levels would likely increase strains within OPEC+ as some members would want to pump more to relieve their economies, Citigroup said in a note.
Additional reporting by AP, with staff writer
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