Oil prices extended gains on Thursday after the OPEC+ alliance of major producers stuck to a reduced output policy.
Brent, against which Nigeria’s oil priced, rose by 47 cents, or 0.8 percent, to $58.93 a barrel, at 03.17 GMT, having earlier hit their highest since Feb. 21, 2020 in the wake of the OPEC+ decision.
“Crude prices have been rising higher now that OPEC+ has convinced the energy market that they are determined in accelerating market re-balancing without delay,” senior market analyst at OANDA, Edward Moya, told Reuters.
The Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, extended its current oil output policy at a meeting on Wednesday.
This is an indication that producers are happy that their deep supply cuts are draining inventories despite an uncertain outlook for a recovery in demand as the coronavirus pandemic lingers.
A document seen by Reuters on Tuesday showed OPEC expects the output cuts will keep the market in deficit throughout 2021, even though the group cut its demand forecast.
OPEC+ agreed to cut 7.2 million bpd in combined production in January.
Russia also agreed to adding 500,000 bpd to the group’s production each month between January and April.
For February and March, the cartel agreed to keep production cuts at 7.2 million bpd.
However, Nigeria and Lybia saw lower output due to internal problems.
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This is because Nigeria had to declare force majeure on Qua Iboe exports after a fire erupted at the export terminal, halting production and loading, shipping and trading.
Continued progress in rolling out COVID-19 vaccines is also an important driver of oil prices, OANDA’s Moya said.
“The world now has several effective COVID vaccines that should really force energy traders to upgrade their return to pre-pandemic behaviour forecasts,” he said.
