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Market Overview
Brent Crude Prices May Tumble to $60 after OPEC+ Meeting
Crude prices are highly dependent on risk appetite and business activity expectations. Such expectations may be an explanation of the rally in crude prices, stock indices and other risky assets in the recent weeks. However, crude prices rally is rather more emotional and was not supported by strong fundamentals.
In February, OPEC estimated daily crude demand up by 5.6 million barrels per day in 2021 after it tumbled by roughly 10 million bpd in 2020. Meanwhile crude prices are already at those levels of early 2020 demand with Brent crude at $63-65 per barrel.
So, at such high prices OPEC+ may reconsider the existing deal. Crude exporters bound by the OPEC+ agreement are suffering from the artificial restrictions. Saudi Arabia is rumored to withdraw its voluntary unilateral production cuts by 1 million bpd. Moreover, the cartel and its allies may increase production quotas by 500,000 bpd starting April. Needless to say, other crude exporting countries that are not a part of the OPEC+ deal are enjoying current favorable high prices and boosting their crude production.
Consequently, crude supply may rise significantly ahead of the driving season. On the other hand, the demand is still limited by existing lockdowns and slow economic recovery of crude importing countries. With this in mind, any OPEC+ decision on lowering production cuts may pressure crude prices. Besides, crude is seen more as an overbought asset at the moment.
From the technical point of view, the level of $60 per barrel of Brent crude is looking as a good support with a previous February highs located close to it too. It is also a strong psychological level that may limit Brent crude prices decline.
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