Oil futures rose Tuesday, extending gains seen the previous session after Saudi Arabia and several of its OPEC+ allies surprised traders on Sunday by announcing a production cut of over a million barrels a day.
Price action
-
West Texas Intermediate crude for May delivery
CL.1,
+0.71% CLK23,
+0.71%
rose 84 cents, or 1%, to $81.26 a barrel on the New York Mercantile Exchange. -
June Brent crude
BRN00,
+0.65% BRNM23,
+0.65% ,
the global benchmark, gained 78 cents, or 0.9%, to $85.71 a barrel on ICE Futures Europe. -
Back on Nymex, May gasoline
RBK23,
-0.20%
rose 0.4% to $2.768 a gallon, while May heating oil
HOK23,
+0.69%
gained 1.2% to $2.695 a gallon. -
May natural gas
NGK23,
+1.53%
edged up 0.1% to $2.101 per million British thermal units.
Market drivers
Brent and WTI both soared more than 6% on Monday after Saudi Arabia and other OPEC+ members announced Sunday that they would make production cuts totaling around 1.16 million barrels a day beginning in May, while Russia said it would extend a March cut of 500,000 barrels a day through the end of the year. OPEC+ is made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia.
See: Why OPEC+ cut oil production: 6 things investors need to know
Analysts said data showing speculative traders held large short positions likely accelerated Monday’s rally, forcing players to buy futures to close out losing trades.
“Oil prices are still moving to higher equilibrium even as post-OPEC price action exceeded most modeled expectations, likely due to legacy short positioning that skewed the near-term price risks in an overly bullish direction,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
He said markets may now be close to “price equilibrium,” with oil’s direction likely to depend on economic data, with crude supported by upgrades to Wall Street price forecasts and expectations the Federal Reserve will back off on raising interest rates much further, helping the U.S. economic growth outlook.
This post was originally published on Market Watch
