- Oil prices rose by 21 cents to $68.53 on Friday following Saudi-Russian summit
- Banking problems in the U.S have dampened optimism around Saudi-Russian summit
- Analysts believe that OPEC+ will remain inactive unless Brent prices drop below US$70
Harare-Oil prices are set to experience their steepest weekly decline of the year, with West Texas Intermediate (WTI) futures climbing only slightly above US$69 a barrel on Friday. The market disruption caused by by banking problems in the U.S and Switzerland, pushed investors to sell off global assets including commodities, and have dashed the expectations of analysts who had predicted a price surge following the Saudi-Russian summit.
Oil prices rose on Friday 10th following a discussion between Saudi Arabia and Russia that alleviated market jitters and bolstered expectations of Chinese demand. Brent crude futures rose by 30 cents to $75 a barrel, while U.S. West Texas Intermediate crude rose by 21 cents to $68.53 a barrel.
However, optimism that Saudi-Russian summit bolstered was dampened by banking problems in the U.S. and Switzerland, pushing investors to sell off global assets including commodities.
Both contracts saw their biggest weekly declines since December, with WTI falling below $70 a barrel for the first time in more than a year.
In response, OPEC and its allies have considered steps to "bolster market equilibrium and steadiness" and their governing committee is scheduled to meet on April 3.
Analysts believe that OPEC+ will remain inactive unless Brent prices drop below $70 for a prolonged period of time, and they will wait for financial markets to stabilize before making decisions.
"External factors continue to have a major impact on oil prices," said Warren Patterson from ING Groep NV. "The extent of the sell-off in oil will be of great concern to OPEC+, but they will likely take their time before taking any action, and wait for markets to normalize."
Investors remain wary of contagion risks among banks and worries of a global recession that could diminish oil demand. Analysts from CMC Markets and ANZ highlighted signs of recovery in developed economies, but warned that banking troubles, rate hikes and inflation cannot be solved overnight.
Moreover, the short-term outlook for oil is grim, as OPEC has forecast a modest surplus in the second quarter, which is traditionally a period of low demand, and the International Energy Agency (IEA) has highlighted that the market was already in surplus due to Russian production.
An OPEC+ meeting on 3 April and potential measures to refill the U.S. Strategic Petroleum Reserve could influence prices. The National Australia Bank suggested OPEC+ may reduce supplies to prevent a predicted inventory build in the second quarter. If prices fall further, the U.S. government could begin refilling the SPR, stimulating demand.
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