More upside to come for the oil price

The Brent crude oil price its highest level since last February this week. And there could be more gains to come.

Brent crude reached $56.75 a barrel this week, its highest level since last February. Saudi Arabia’s announcement last week that it will cut output by one million barrels per day (mbpd) from February gave crude its best week in four months; Brent is already up by more than 8% since the start of the year.  

Saudi Arabia and Russia, the two-leading producers in the Opec+ cartel, have spent much of the past year squabbling about how to respond to the Covid-19 crisis, says Oilprice.com. The Saudis have consistently favoured supply cuts in order to keep prices high, while the Russians argue that strategy will just hand profits over to US shale producers (who operate independently of Opec+). Saudi Arabia’s unilateral cut ends the group’s focus on sharing output curbs equally, with Russia and Kazakhstan set to raise output by 75,000bpd from next month. 

Oil markets had a bout of the “hebee-jeebies” earlier this week as parts of China moved back into lockdown, says Stephen Innes of Axi. A durable drop in Chinese activity is a key risk to oil markets. Nevertheless, the scale of the Saudi output cuts provides a decent cushion against bad news. US political developments are also keeping traders optimistic: Democrat control of the Senate means more regulation of US shale producers is likely, which could put a lid on US production. “Risks remain”, but there could be more upside to come.

Recommended

How to keep your dividends safe from the taxman
Personal finance

How to keep your dividends safe from the taxman

We look at ways to keep your dividends safe ahead of the decrease in tax allowances.
28 Mar 2023
Shoppers feel the pain as food inflation hits a record
Personal finance

Shoppers feel the pain as food inflation hits a record

Data from the analytics group Kantar showed food inflation hit a fresh peak in March 2023
28 Mar 2023
11 investment trusts for inflationary times
Investments

11 investment trusts for inflationary times

Inflation eats away at the value of your money, but these investment trusts can help you grow your wealth.
28 Mar 2023
Best junior stocks and shares ISA platforms
Isas

Best junior stocks and shares ISA platforms

A junior stocks and shares ISA is a great way to save for your child tax-efficiently. But it can be confusing deciding which investment platform to ch…
28 Mar 2023

Most Popular

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023