[원유마감]WTI 4.2%↑… Saudi Arabia’s 1 million barrel production cut’surprise’ extended

Organization of Petroleum Exporting Countries/AFP=News 1

International oil prices soared more than 4%. This is thanks to the fact that Saudi Arabia, the de facto leader, along with the Organization of Petroleum Exporting Countries (OPEC) Plus (+), announced that they will also extend voluntary production cuts by an average of 1 million barrels per day.

◇ Reduction of 1 million barrels in Saudi Arabia is extended

Futures for April delivery of Western Texas Crude Oil (WTI) on the 4th (local time) recorded $63.83 per barrel, a jump of $2.55 (4.2%) compared to the battlefield. It is the best in almost two years since April 2019.

The North Sea Brent oil May contract was signed at $66.73 per barrel, soaring $2.68 (4.15%).

On this day, OPEC+, which Saudi Arabia and Russia participated in, finished the meeting and decided to extend the existing production cuts until the end of April without increasing production. However, Russia and Kazakhstan were allowed to increase production by an average of 130,000 barrels and 20,000 barrels per day.

Saudi energy minister Abdulaziz Binsalman said at a press conference that “all member states (except Russia and Kazakhstan) will freeze production at the current level.”

He added, “Saudi decided to gradually reduce its voluntary reduction of an average of 1 million barrels per day over the next few months,” he said. Minister Abdulaziz stressed, “We are not in a hurry to advance (increased production).”

Saudi Arabia’s voluntary extension of production cuts was’surprise’. Bart Melech, head of the raw material strategy division at TD Securities, said, “OPEC surprised us’surprise’.” ‘That is,’ he said.

◇The background of the extension of production cuts is slowing demand in China

Last year, OPEC+ decided to cut production average of 9.7 million barrels per day in response to demand collapse due to the pandemic (a pandemic pandemic), and a gradual production schedule was agreed. Production increased by 2 million barrels in August last year and 500,000 barrels in January this year, and the current production reduction is 7 million to 7.2 million barrels per day on average.

And although it is expected to increase production by 500,000 barrels from this month, OPEC+ agreed to continue the reduction of production at the current level until the end of April. Last week, oil prices declined in anticipation of an increase of 1.3 to 1.5 million barrels per day on average, but the possibility of extension of production cuts was raised the previous day and began to rise again.

And oil prices jumped more than 4% on the news of’surprising’ that the voluntary reduction of 1 million barrels per day was extended to Saudi Arabia.

Ahead of this meeting, according to CNBC, Saudi Arabia, the de facto OPEC leader, urged other oil-producing countries to be “very cautious” regarding their production policies. This is because the oil price, which has been raised and managed to increase production with confidence in anticipation of a complete recovery of the crude oil market, can collapse in an instant.

An OPEC+ expert report obtained by Reuters pointed out that “the recent oil price rally may have been triggered by financial market participants, not by improving the fundamentals of the crude oil market.” In fact, last month’s factory activity in China was pushed to the lowest level in nine months, showing the possibility that demand for crude oil in China has declined. This means that China, the world’s largest oil importer, may have recently slowed.

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