Brent jumps nearly 6% on OPEC+ surprise

So, let’s be honest – no one saw that coming. OPEC and its allies have reportedly agreed to keep output steady through April rather increase it by 500K barrels per day as was widely expected. Brent oil jumped nearly 6% and was holding near its highs as the final statements were being prepared ahead of a press conference.

Source: ThinkMarkets and TradingView.com

Saudi Arabia, pulling the strings again, convinced fellow OPEC oil producers to “keep our powder dry” amid persistent uncertainty during this pandemic. Saudi’s oil minister Prince Abdulaziz bin Salman, acknowledged that the market had improved since January, but wanted to “urge caution and vigilance,” adding that “…before we take our next step forward, let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train.”

According to reports, Saudi Arabia has agreed to maintain a voluntary 1 million bpd cut, while Russia was allowed a 130,000 bpd increase in quota and Kazakhstan 20,000 bpd.

The next OPEC+ meeting is on April Fool’s day.

It remains to be seen whether Brent oil will make significant news highs for the year after testing the prior high of $67.68 on the back of OPEC+ headlines. Today’s decision is clearly a positive outcome for oil prices. The oil market has already been tightening, and now with vaccinations well underway across important regions of the world, travel demand should keep prices supported for the next few months I would think.
 
All eyes on Powell

With OPEC+ out of the way it is all about Jay Powell, the Fed Chair, next, who will do his best to quell talks of QE tapering during his much-anticipated speech about the US economy at an online event, starting shortly. Wednesday’s soft employment data from the ADP and the weaker employment component of the ISM services PMI may be among the factors Powell will use to reaffirm that the central bank is determined to keep monetary policy accommodative. However, Powell can’t be too dovish either as he will also need to address worries about inflation. So, he will have a tough job convincing the markets that Fed’s policy is on the right path. Stocks may drop further if he’s unable to do so.