Crude Oil Prices Outlook: OPEC+ Output Cut Extension In Focus

Crude oil prices were little-changed during Wednesday’s APAC session as traders await fresh catalysts from the upcoming OPEC+ meeting. Oil prices fell over 2% a day ago, weighed by a stronger US Dollar and the resumption of traffic in the Suez Canal. The disparity of vaccine rollout progress across the Atlantic led the US Dollar to strengthen against the Euro, sending the DXY US Dollar index to a four-and-half month high of 93.36. A stronger US Dollar exerted downward pressure on commodity prices due to their inherent negative relationship.

Prices are also facing a couple of headwinds, including a larger-than-expected build in API crude inventories, a revision down of this year’s oil demand outlook by OPEC+, and the lingering impacts of a third viral wave in Europe. Against this backdrop, market participants are expecting OPEC+ to roll over its current production cut through May to stabilize prices.

At the previous month’s meeting, Saudi Arabia surprised the markets by announcing a unilateral, voluntary 1 million bpd cut. This move sent WTI to its 22-month high before a technical correction followed. Prices have retreated 8.8% from the recent peak, as the energy demand outlook was tarnished by renewed lockdown measures in Europe amid a third viral wave and delays in vaccine rollouts in the region.

Crude Oil Prices Outlook: OPEC+ Output Cut Extension in Focus

Source: Bloomberg, DailyFX

The American Petroleum Institute (API) reported a larger-than-expected rise in crude inventories for the week ending March 26th. Stockpiles increased by 3.91 million barrels, compared to a baseline forecast of 0.107 million barrels. This suggests that demand is probably cooling at a faster-than-expected pace.

Similarly, the Energy Information Administration (EIA) has reported inventory build for five consecutive weeks, with a total 40.95 million barrels adding to the stockpiles (chart below). The institution will release its latest weekly data today, in which the market foresees a 1.5-million-barrel dropas refiners are speeding up operating after extreme cold weather swept the country in February.

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