OPEC+ is likely to maintain its conservative approach in light of the recent oil price falls from the new coronavirus quarantines and stricter travel restrictions across Europe, experts said Thursday.
Both Brent and WTI benchmarks saw wide price fluctuations since early March. Nonetheless, prices had been boosted by the OPEC+ decision to hold production levels unchanged in April. Positive developments on vaccine rollouts also instilled hopes of an earlier oil demand recovery.
At a time when the global oil market was struggling with oversupply and weak demand, the decision of OPEC+ to hold back production was exactly what was needed and resulted in Brent briefly hitting $71.38 a barrel and WTI $67.98 a barrel on March 8.
Despite the upward price trend, recent oil price gains were lost with Brent falling by 15.6% and WTI by 12% to reach $60.27 and $57.25, respectively on Tuesday, March 23, as new lockdowns and travel restrictions across Europe fueled demand fears.
"The oil market received its shot in the arm at the last meeting of the OPEC+ group. However, with prices having lost much of their March gains, it looks like a booster will be needed at the end of the month," Ian Simm, principal advisor at consultancy IGM Energy, told Anadolu Agency.
OPEC+ is scheduled to meet on April 1 to consider their output cuts after April.
Simm said the group is likely to maintain its conservative approach "at least until a clearer path towards broader economic recovery can be seen."
As several European countries, including France, Germany, Austria and Italy re-imposed or extended the strict mitigation measures or announced lockdowns ahead of Easter, road fuel demand is set to take a major hit in an otherwise busy season.
The UK will also see new restrictions from Thursday, as the country announced that people attempting to travel abroad without a legitimate reason would be fined up to nearly £5,000.
The US National Institute of Allergy and Infectious Diseases, who warned that the AstraZeneca vaccine could have included outdated information in its data, did not help demand concerns.
The company said the primary analysis results would be announced within 48 hours. However, several European countries have already banned the vaccine developed by the company over alleged blood clotting problems.
Rising US crude oil inventories also added to demand concerns as the latest data from the Energy Information Administration showed that inventories increased by 1.9 million barrels to 502.7 million barrels for the week ending March 19, higher than the market expectation of a rise of 900,000 barrels.
Geopolitical risks also played their role in limiting further price collapses, as according to oil analytics firm Vortexa, Suez Canal tanker traffic was briefly halted after a container ship ran aground in the canal, blocking ten tankers carrying 13 million barrels of crude oil.
By Firdevs Yuksel and Sibel Morrow