Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

OPEC+ Drama Helps Gasoline to 1st Week Above $2 Since 2019

CommoditiesMar 05, 2021 04:49PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

By Barani Krishnan

Investing.com -  US gasoline futures finished their first week above $2 per gallon since 2019, while global crude benchmark Brent neared $70 a barrel, after producer alliance OPEC+ largely withheld a production hike for next month, defying market expectations.

New York-traded RBOB gasoline futures settled at $2.065 per gallon on Friday, finishing its first week above the $1-gallon territory since the $2.047 settlement for the week ended May 10, 2019. For the current week, RBOB gasoline gained 10%, extending to nearly 47% its year-to-date rally.

The average gasoline price at U.S. pumps, meanwhile, hit $2.75 per gallon on Friday from $2.41 a year ago, the American Automobile Association reported.

On the crude front, U.S. benchmark West Texas Intermediate settled at $66.09, up $2.26, or 3.5%, on the day. For the week, WTI rose 7.5% and year-to-date, it was up about 36%. The U.S. crude benchmark also hit a 13-month high of $66.40 during Friday’s session.

London-traded global benchmark Brent settled at $69.36, up $2.62, or 4% on the day. For the week, Brent rose almost 5% while year-to-date, it rose about 34%. It also hit a 13-month high of $69.57 intraday.

“It’s always on the highs that the market looks the most bullish, but keep in mind that oil struggled to keep pace with other commodities because there was perception of supply overhang, (that) higher prices would result in more OPEC supply and also a return of shale,” Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina, said.

“It turns out that OPEC is sending the message that they are not concerned with their competition any more and are willing to let prices rise as the signals from the industry are that their production will not grow in a significant way.”

The competition that Shelton was referring to was U.S. shale oil drillers, who have let the country’s one-time world high production of oil slip by 30% in just a year. As of March 2020, U.S. crude output was at a peak of 13.1 million barrels per day. It is now at 10 million bpd, after the demand destruction to energy caused by the coronavirus pandemic.

It’s that same demand worry that prompted OPEC+ head honcho Saudi Arabia to pass on an output hike for April at the group’s meeting on Thursday. The kingdom allowed only two countries — Russia and Kazakhstan —  in the 23-nation oil producing alliance to raise output. 

Traders had expected OPEC+ to endorse a hike of as much as 1.5 million bpd for April, including 1.0 million bpd for Saudi Arabia.  But the hike the cartel agreed to was minimal — just 130,000 bpd for Russia and 20,000 for Kazakhstan. Saudi Arabia, on its part, opted instead to cut 1.0 million bpd next month, repeating what it had done for February and will be doing for March too.

On the whole, OPEC+ has been withholding at least 7 million bpd from the market over the past 10 months, significantly draining a glut in global crude inventories to near five-year normal levels. The alliance’s actions have succeeded in bringing U.S. crude from a historic negative pricing of -$40 per barrel in April 2020 to 13 month highs now.

Analysts are debating how long the Saudis themselves can continue making such cuts and potentially risk losing market share to more aggressive oil U.S. exporters, who aren’t a part of OPEC+. While shale output is down now, U.S. drillers can logically ramp up both output and exports with WTI trading at above $65 now.

Saudi Oil Minister Prince Abdulaziz bin Salman seemed to make a calculated bet on Thursday that U.S. drillers will not make a comeback like before to flood the market with a glut of supply as the industry was more keen in turning a profit with fewer barrels. 

“‘Drill, baby, drill’ is gone forever,” the prince told Bloomberg in an interview, referring to the catchphrase often used to describe the prolific U.S. shale patch.

Abdulaziz appears right for now. U.S. rigs actively drilling for oil have risen by less than 50 this year. This week itself, it grew by just one to reach 310. In March 2020, they were as high as 683, before collapsing to a low of 172 by August, as the Covid-19 crushed demand. 

OPEC+ Drama Helps Gasoline to 1st Week Above $2 Since 2019
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
Notvery Goodathis
Peteymcletey Mar 06, 2021 4:39PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Somehow they will find a way not to blame Biden. Even though markets are forward looking.
Pogey Piza
Pogey Piza Mar 06, 2021 8:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hmmmm Sounds like a "smoke screen tactic" from the Saudi's to divert attention away from the  Jamal Khashoggi **** MBS knew that oil traders would relish the "surprise reduction" of oil and forget all about the grisly event. Power of money clearly rules the roost....sad
Alan Rice
Alan Rice Mar 06, 2021 8:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
PP: (Look again.)
Rick Baier
Rick Baier Mar 06, 2021 8:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks Joe Biden. 4 Dollar gas soon. Not my president
Viking Fire
Viking Fire Mar 06, 2021 1:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gas has gone up and down forever in all circumstances. Boring.
David Bennett
David Bennett Mar 05, 2021 9:03PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
drama and inflation, keep it coming.
Viking Fire
Viking Fire Mar 05, 2021 9:03PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Chinese think everyone is named david bennett now?
JR Pierce
JR Pierce Mar 05, 2021 6:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yeah right, it has nothing to do with Sniffer Biden in the WH, they need to file these stories in the Fiction & Fantasy section.
Alan Rice
Alan Rice Mar 05, 2021 6:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
TOP SECRET : ( Elvis has a cabin on the dark side of the moon.)
Barani Krishnan
Barani Krishnan Mar 05, 2021 6:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
JR Pierce: Keep your political bias to yourself and stick to the market facts.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email