OPEC+, an influential energy alliance of OPEC and non-OPEC partners, swiftly decided to green-light the return of 400,000 barrels per day for March. The move, widely expected by energy analysts, marks a continuation of the group's strategy to gradually reopen the taps. Led by Saudi Arabia and Russia, OPEC+ is in the process of unwinding record supply cuts of roughly 10 million barrels per day. The group agreed on Wednesday to a further planned increase in output, even as crude prices trade near record levels amid geopolitical tensions. The historic production cut was put in place in April 2020 to help the energy market recover after the coronavirus pandemic cratered demand for crude. Russian Energy Minister Alexander Novak has previously said the broader group does not wish to boost production levels too quickly as it remains wary of potential changes to demand. Meanwhile, global oil markets are losing a bit of ground as doubts over the ability of OPEC+ to maintain full production capacity persist and the supply outlook remains tight. The hope that OPEC+ crude oil output could bring balance to the market appears weak and traders are bracing for more volatility, said Rystad Energy's Senior Oil Markets Analyst Louise Dickson. "There is an upward risk as supply remains tight globally, but bearish price pressure may be evident in the short-term as geopolitical tensions may ease and the gas shortage is so far mitigated by warmer weather forecasts," she added. She said, the Ukraine question has taken a back seat, indicating that the chance the world's largest energy powerhouses, in terms of fossil fuel output, may manage to avoid military action, as was the case for the entirety of the Cold War. Neither party wants to turn up the geopolitical heat and fire up energy prices especially when climate-induced price spikes are still a very salient short-term risk and supply chain shortages would likely exacerbate an impact of such an event. Overall, the market remains bullish on oil prices as it has since May 2020 when OPEC+ enacted mega cuts to its output bringing oil from negative territory to a quite reasonable jump away from $100 per barrel if the right bull conditions materialize in the coming weeks. The prevailing expectation is that the market, despite some downward blips caused by pandemic demand scares, will continue to trade high on oil as real supply shortages exist both in the short and long-term view. While other market players are calling for a prolonged supercycle, the volatility of the market will likely be short-lived and corrected by a response from short-term cycle barrels. Should market volatility continue longer than expected, the bull cycle will be here to stay and oil prices will climb even higher. — Agencies
