- Oil prices jumped by nearly $10 per barrel last week
- Large jump was followed by a slight pullback in oil prices as traders took profits
- Sentiment is decidedly bullish and banks are betting on triple-digit oil prices
After OPEC+ announced production cuts of about a million barrels daily last week, oil prices jumped, only to ease earlier today as traders took profits.
The nominal size of the OPEC+ production cut was set at 2 million barrels daily but the actual cuts were agreed at between 1 million bpd and 1.1 million bpd, according to Saudi energy minister Abdulaziz bin Salman.
The decision signaled even tighter physical oil markets ahead, pushing oil prices higher, although not as sharply higher as such a decision might have pushed them a couple of years ago when there was little else to affect the movement of prices.
Now, however, fears of a deep recession in Europe, in no small part caused by an energy crunch that began last year, are serving to constrain oil prices from rising too high. Many see demand destruction on the cards for the immediate future, despite banks’ latest price forecasts, most of which see Brent returning to three-digit territory before the year’s end.
Despite the slide at the start of trade this week, oil is palpably higher than a week ago, with Brent at over $97 per barrel at the time of writing and West Texas Intermediate at close to $92 per barrel.
"Profit-taking might be the main reason to pressure the oil prices today after five-day gains last week," one CMC Markets analyst told Reuters earlier today.
Analysts seem to be unanimous that the OPEC+ cuts are bullish for crude although some note that there is still a lot of uncertainty on international markets. Some of that would disappear when the EU embargo on Russian crude comes into effect and when the G7 oil price cap on Russian oil kicks in. However, it is likely that the certainty, which will replace it, will be a certainty of higher oil prices.