After OPEC and its allies decided not to increase supply in April, oil prices rose nearly 3% on Friday coupled with a stronger-than-expected US jobs report, reaching their highest levels in more than a year.
Brent futures rose $2.62, or 3.9%, to settle at $69.36 a barrel. The session high for the global benchmark was its highest since January 2020.
West Texas Intermediate (WTI) crude rose $2.26, For the week, Brent gains 5.2% gain, WTI up 7.4%or 3.5% to settle at $66.09 a barrel.
For the week, Brent was up 5.2%, rising for a seventh week in a row for the first time since December, while WTI was up about 7.4% after gaining almost 4% last week.
Both contracts rose more than 4% on Thursday after the Organization of Petroleum Exporting Countries and its allies extended their oil production limits to April with small exemptions to Russia and Kazakhstan.
While market participants expected an increase of 1.5 million barrels a day, OPEC + cautiously decided to increase production by just 150,000 barrels a day in April.
Although oil prices have been on the rise for the past two months following the COVID-19 vaccination programs around the world, investors were surprised that Saudi Arabia decided to continue the voluntary cut of 1 million barrels a day until April.
Some forecasters revised their price expectations upwards following the OPEC + decision.
Goldman Sachs raised its Brent crude oil price forecast to $ 75 a barrel in the second quarter and to $ 80 a barrel in the third quarter of this year. UBS raised its Brent forecast to $ 75 a barrel and WTI to $ 72 in the second half of 2021.
A strong U.S. employment report and non-farm payroll report show Americans are closer to pre-pandemic behavior that will drive crude oil demand.
The dollar, which has seen its highest level since November, limits the increase in crude oil prices. A stronger dollar makes oil more expensive for investors with other currencies.
However, the expectation of slow physical crude oil sales and an unexpected recovery in demand by the third quarter points to the unwarranted price increase. It is also thought that the price risk is mainly downward and the current price is exceeded.
India, the world’s third-largest oil importer and consumer, says that OPEC +’s decision extending cuts as the prices rise could threaten consumption-driven recovery in some countries.
The recovery of oil prices to pre-pandemic levels encourages US oil drillers to return to the well beds. The number of oil rigs has been increasing for the last six months, including this week.
