DUBAI: The price of crude oil rose above $60 a barrel on Monday for the first time in over a year, fueled by the “Saudi surprise” cut in output.
Brent, the global benchmark, touched $60.20, up more than 15 percent since the start of the year. West Texas Intermediate, the US benchmark that briefly fell into negative territory last April, leapt above $57 a barrel, also a 12-month high.
Analysts raised their price targets for 2021, and gave most of the credit for the recent rise to Saudi Arabia’s decision in January to cut an extra 1 million barrels a day from global oil supply for two months.
Bassam Fattouh, director of the Oxford Institute for Energy Studies, said: “Since the announcement of the cut, the oil price rallied despite the reintroduction of lockdowns in many parts of the world.”
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The Saudi decision averted a confrontation between the majority of the 23-strong OPEC+ alliance, who wanted to postpone scheduled increases in supply in the face of continued market fragility, and Russia, which wanted to maximize output.
Some analysts believe oil is in for a further big jump this year, as economic recovery, especially in Asia, stimulates demand under tight supply conditions.
Christyan Malek, head of oil and gas research at US investment bank JP Morgan — who has predicted the surge in crude prices for some time — told Arab News: “I can see the oil price overshooting significantly all the way up to $100.”
He said environmental and financial restrictions on US shale oil under the Biden administration could lead to a new “supercycle” in oil markets. “We’re already at $60 and we’ve hardly seen any planes back in the air,” he said.
Norbert Rucker, head of economics at Swiss bank Julius Baer, said: “We raise our near-term oil-price target to $65, and oil prices could spike above $70 by mid-year.”
When he announced the extra cut last month, Saudi Energy Minister Prince Abdul Aziz bin Salman said he was acting as the “guardian of the oil industry” in support of the Saudi economy and the economies of OPEC+ countries.
All eyes will now be on the next meeting of OPEC+ early next month, when a key decision will have to be made about future supply. The Saudi cut will expire at the beginning of April, adding to global supply.