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March 2, 2021, 3:02 p.m. EST

U.S. oil prices settle below $60 mark as traders bet that OPEC+ will decide to boost output

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By Myra P. Saefong and William Watts

Oil futures fell on Tuesday, with U.S. prices settling below the $60 mark for the first time in more than week, as traders bet that Organization of the Petroleum Exporting Countries and its allies will decide later this week to restore some output in April.

“Crude prices are under increasing scrutiny as the market weighs the potential impact of incoming supply,” said Robbie Fraser, manager of global research & analytics at Schneider Electric, in market update.

“Topping that list is OPEC+, which is likely to continue scaling back record cuts in the months ahead,” he said, including the end of Saudi Arabia’s unilateral 1 million barrel per day cuts at the end of this month.

“Meanwhile, U.S. production continues to bounce back quickly from disruptions tied to extreme winter conditions in February, but longer-term production will need time to respond to higher prices,” said Fraser.

West Texas Intermediate crude for April delivery /zigman2/quotes/211629951/delayed CL.1 -0.02% fell by 89 cents, or 1.5%, to settle at $59.75 a barrel on the New York Mercantile Exchange, though climbed to as high as $61.21 during the session. Front-month contract prices ended at their lowest since Feb. 19, according to Dow Jones Market Data.

May Brent crude , the global benchmark, declined by 99 cents, or nearly 1.6%, at $62.70 a barrel on ICE Futures Europe after tapping an intraday high of $64.13. The settlement was the lowest since Feb. 12.

At an OPEC+ technical meeting held Tuesday, S&P Global Platts reported that OPEC Secretary General Mohammad Barkindo said producers must emphasize “cautious optimism.” The pandemic still poses downside risks to the economy, but “encouraging global economic developments and resilient demand in Asia are upside factors,” Barkindo said.

OPEC+ will hold a committee meeting Wednesday to offer a recommendation on production levels, and the group will hold its main decision-making gathering on Thursday.

Read: Here’s what the oil market thinks OPEC+ should do next

S&P Global Platts Analytics forecasts that collective output pledges for OPEC+ will climb by 1.5 million barrels per day for April, with Saudi Arabia reversing its unilateral 1 million barrel-per-day cut and official quotas climbing by nearly 500,000 barrels a day.

Even so, even more supply will be needed as demand increases further in the subsequent months, said Paul Sheldon, chief geopolitical advisor, analytics at S&P Global Platts.

A Reuters survey estimated that OPEC produced 24.89 million barrels a day in February, a drop of 870,000 barrels a day from January for the first monthly decline since June. OPEC+ had decided to keep output steady in February, while Saudi Arabia said it would unilaterally reduce production by 1 million barrels a day in February and March. The survey found Saudi Arabia cut output by 850,000 barrels a day in February.

If other OPEC+ countries moved to step up supply by 500,000 barrels a day, Saudi Arabia would likely withdraw its voluntary cut, said Eugen Weinberg, commodity analyst at Commerzbank, in a note, which would boost April production alone by more than 1.3 million barrels a day, compared with the Reuters survey for February.

“Added to this would presumably also be higher production from Russia and other non-OPEC countries. Since demand in the West remains fairly fragile, we expect prices to fall in the short term,” Weinberg said.

Read: Goldman Sachs says it’s the beginning of a structural bull market in commodities

Meanwhile, a weekly report on U.S. petroleum supplies will be released by the American Petroleum Institute late Tuesday, followed by official data from the Energy Information Administration early Wednesday.

Analysts expect the EIA to report a climb of 1.3 million barrels in domestic crude supplies for the week ended Feb. 26, according to a survey by S&P Global Platts. They also forecast supply declines of 2.9 million barrels for gasoline and 3.9 million barrels for distillate inventories, which include heating oil.

On Nymex, April gasoline lost 0.3% at $1.9364 a gallon and April heating oil shed 0.6% to $1.8081 a gallon.

April natural gas tacked on 2.2% to $2.839 per million British thermal units.

Read: Why natural-gas prices underperformed oil prices in February by a long shot

/zigman2/quotes/211629951/delayed
US : U.S.: Nymex
$ 63.45
-0.01 -0.02%
Volume: 3,394
April 15, 2021 11:44p
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