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Oil Resumes Climb as Traders Look Ahead to Pivotal OPEC+ Meeting

Published 01/03/2021, 00:46
Updated 01/03/2021, 01:09
© Reuters.

© Reuters.

(Bloomberg) -- Oil resumed gains -- rebounding from the biggest drop since November -- ahead of a keenly anticipated OPEC+ production-setting meeting this week that will help to determine whether a scorching rally endures.

Futures in New York rose above $62 a barrel in early Asian trading after losing 3.2% on Friday. The alliance, led by Saudi Arabia and Russia, meets Thursday and is expected to return some barrels to a market off to its quickest ever start to a year. But it’s unclear how vigorously the group will act, with the Saudi energy minister calling for producers to remain “extremely cautious.”

See also: OPEC+ Faces Calls to Cool Oil Market Frenzy With Extra Barrels

Crude sank on Friday as a strengthening dollar damped the appeal of commodities priced in the currency and amid concerns around inflation. Yet, the American oil benchmark still managed to rally nearly 18% in February.

Saudi Arabia’s deep output cuts, an improving demand outlook and the growing popularity of commodities as a hedge against inflation have pushed oil higher this year. There’s been a raft of bullish calls in recent weeks predicting the rally will continue as the producer response lags behind consumption, while maintenance in North Sea fields is set to cut supply in the coming months.

OPEC+ continues to idle just over 7 million barrels of daily output -- about 7% of global supply -- and will this week decide whether to revive a 500,000-barrel tranche in April. The Saudis will also confirm whether an extra 1 million barrels they’ve recently taken offline will return as scheduled. If the output hikes fall short of requirements, however, it could trigger a further surge, and the 23-nation group would be forced to deal with its consequences.

©2021 Bloomberg L.P.

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