Oil prices climbed 2% on Friday and marked weekly gains as traders awaited a decision from OPEC+ regarding supply agreements for the second quarter, all while considering recent economic data from the United States, Europe, and China.
Brent futures for May settled $1.64 higher, or 2%, at $83.55 a barrel. At the same time, the April Brent futures contract concluded on February 29th at $83.62 per barrel. Additionally, U.S. West Texas Intermediate (WTI) for April saw an increase of $1.71, or 2.19%, reaching $79.97 per barrel.
Brent experienced a weekly gain of approximately 2.4% following the contract month switch, while WTI saw a more substantial increase of over 4.5%.
The market’s primary focus remains on the anticipation that OPEC+ will extend its voluntary production cuts well into the second quarter of 2024, as noted by Andrew Lipow, president of Lipow Oil Associates.
A decision on extending these cuts is expected in the first week of March, with individual countries within OPEC+ set to announce their respective decisions. Analyst Carsten Fritsch of Commerzbank remarked that adhering to the voluntary production cuts until year-end would send a strong signal and thus be viewed as price-positive.
Based on findings from a Reuters survey, OPEC’s output in February reached 26.42 million barrels per day (bpd), reflecting an increase of 90,000 bpd compared to January. Additionally, expectations of Saudi Arabia maintaining crude prices for Asian customers in April at levels similar to March further supported the market sentiment on Friday.
Geopolitical tensions in the Red Sea also contributed to the upward movement in prices, with Yemen’s Houthis indicating potential military actions in the region.
In terms of supply, U.S. energy firms increased oil and natural gas rigs for a second consecutive week, reaching the highest level since September. This rise in rig count suggests potential future output increases.
On the demand side, Chinese manufacturing activity continued to contract for the fifth consecutive month in February, as indicated by an official survey. Eurozone inflation also saw a decline in February, albeit slightly missing analysts’ expectations. However, the U.S. personal consumption expenditures (PCE) index for January met economists’ expectations, reinforcing market expectations for a June interest rate hike.
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Author Faith Yakubu 
