BANGALORE, India: Contrary to analysts' predictions, OPEC and its allies decided to leave oil production unaffected until April, citing the unstable demand brought on by the coronavirus pandemic, leading to oil rallying at its highest in over one year at 4 percent last week.
Brent crude rose $2.67, or 4.2 percent, to $67.75, its highest since January 2020, and finally settled at $66.74 per barrel, while U.S. crude futures increased $2.55, or 4.2 percent, to $63.83, having also seen a January 2020 peak at $64.86.
"OPEC surprised us... The message OPEC is sending the market is they're quite willing to see oil prices run hot and, ultimately, go a long way in reducing the inventory overhang built last year because of COVID-19," said Bart Melek, head of commodity strategies at TD Securities.
While Saudi Arabia, the group's leader, said it would continue with its voluntary oil output cut of 1 million barrels per day and decide when to gradually phase it out in the coming months, Russia sought to boost output by 130,000 bpd in April.
"Russia is one thorn to the bullish cocktail though, and very few are surprised," Bjornar Tonhaugen, head of oil markets at Rystad Energy, said in a note.
Kazakhstan was also permitted to increase output by 20,000 bpd.
Some analysts had initially predicted that OPEC+, an alliance of the Organization of Petroleum Exporting Countries and other major producers, would increase output by some 500,000 bpd.
"Russia aside, the biggest winner of an OPEC+ rollover is the U.S.. With such price levels, which are now boosted even more after the news of a possible rollover consensus, the U.S. can comfortably increase production, even from costly break-even projects," Tonhaugen added.
Supporting this sentiment, Yemen's Houthi forces said they had fired a missile this week at a Saudi Aramco facility in Jeddah.