Oil prices rose more than 1% on Friday, extending gains from the previous session, after OPEC and its allies agreed not to increase supply in April as they await a more substantial recovery in demand amid the coronavirus pandemic.
Brent crude futures for May rose 83 cents, or 1.2%, to $67.57 a barrel at 0609 GMT, and was on track for a 2% gain in the week.
U.S. West Texas Intermediate (WTI) crude futures were up 77 cents, or 1.2%, to $64.60 per barrel.
Both contracts surged more than 4% on Thursday after the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, extended oil output curbs into April, granting small exemptions to Russia and Kazakhstan.
“It just goes to show how much of a surprise the OPEC+ discipline is,” said Michael McCarthy, chief market strategist at CMC Markets.
Investors were surprised that Saudi Arabia had decided to maintain its voluntary cut of 1 million barrels per day through April even after oil prices rallied over the past two months.
“An array of factors coalesced to bring the parties together, but the resultant price increase will almost certainly push the parties to change their minds when they meet again on April 1, 2021,” commodity analysts at Citigroup said in a note.
Oil prices have soared since the start of November but physical demand for crude from refiners and other end users has yet to catch up, with cargoes to key markets like China broadly trading at lower prices amid sluggish sales.
“Next month’s meeting will almost certainly see further production cut reductions, but the physical demand shortfall will remain at elevated levels for now,” said Jeffrey Halley, senior market analyst at OANDA.
“With OPEC+ moving to a monthly assessment schedule, a lot more binary ambiguity has been introduced into oil markets.”
The OPEC+ decision to continue with the output cuts would hurt consumers in oil buying nations, Indian oil minister Dharmendra Pradhan told Reuters on Friday.
Analysts are reviewing their price forecasts to reflect the continued supply restraint by OPEC+ as well as U.S. shale producers, who are holding back spending in order to boost returns to investors.
Goldman Sachs raised its Brent price forecast by $5 to $75 per barrel in the second quarter and $80 per barrel in the third quarter of this year, while UBS raised its forecast for Brent to $75 per barrel and for WTI to $72 per barrel in the second half of 2021.
Reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Himani Sarkar and Jane Wardell