Crude prices are soaring after OPEC+ stunned energy markets with the incredibly bullish decision to keep output unchanged. The Saudi decision to extend their voluntary 1 million bpd cut was shocking as it leaves them vulnerable to losing market share next month when the oil market is in deficit by a couple million barrels.
This outcome was not expected and pretty much guarantees a tight market up through the summer. The bullish oil party is not ending anytime soon, and everyone will need to upgrade their end of year oil forecasts.
No one will ever doubt Saudi Prince Abdulaziz and bearish bets leading up to an OPEC meeting will be limited. A couple of weeks ago, he urged his oil-producing members to be “extremely cautious” about raising production. Abdulaziz has earned the respect of the oil market and is very much responsible for a good part of oil’s price recovery over the past year.
The Russians seemed satisfied to wait one more month before raising production. They have been struggling to ramp up production and knew this decision would just translate into greater oil revenues.
In the US, shale companies are rejoicing over the OPEC+ decision to keep output steady. US E&P won’t have to stay disciplined now that WTI crude is firmly above the $60 level.
Energy stocks in the S&P 500 are roaring higher by 3.6%, single-handedly keeping the index flat ahead of Fed Chair Powell’s speech.
The Canadian dollar had a delayed reaction but is rallying against all of its major trading partners. The Canadian economy might not have had the best COVID vaccine led recovery, but firm oil prices will provide much support to oil-exporting country.
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