Crude oil prices rallied higher at most parts of Asia’s trading session on Friday. The recent price surge in crude oil prices is coming on the heels of Thursday’s OPEC+ meeting, with a stern warning to its overproducing members and energy speculators.
Earlier in the day, Brent crude prices gained 0.81% to $43.65 and WTI futures were up 0.76% to $41.29. Both crude oil benchmarks remained above the $40-mark.
Why Oil prices are rallying up? OPEC+ Joint Ministerial Monitoring Committee (JMMC) meeting held on Thursday, revealed that OPEC+ members agreed to obey the 7.7 million barrels per day production cuts agreed on in the month of July.
In addition, Saudi’s Energy Minister, Prince Abdulaziz bin Salman, sent an unusually stern warning to both overproducing members (the United Arab Emirates in particular) and energy price speculators.
“Using tactics to over-produce and hide non-compliance have been tried many times in the past, and always end in failure,” Prince Abdulaziz said at the opening session of the OPEC+ committee that monitors the output cuts.
In an explanatory note, Stephen Innes, Chief Global Market Strategist at AxiCorp gave the following insights on Saudi’s battle against overproducing members:
Oil prices recovered after Saudi Arabia threw down the compliance gauntlet, publicly raking laggards over the coal and firing lightning bolts at short-sellers.
In a week where oil price fragilities were exposed after traders digested a combination of gloomy agency short-term forecasts, it was Saudi Arabia throwing down the gauntlet, publicly raking laggards over the coal while emphatically calling for OPEC+ members to meet their quotas that gushed oil prices to their most massive three -day advance since May.
During the OPEC+ Joint Ministerial Monitoring Committee (JMMC) meeting, Saudi Arabia’s Prince Abdulaziz bin Salman read the riot act to cartel members who cheated on production quotas.
And Russia’s Energy Minister Alexander Novak chimed in for good measure saying the group should continue to strive for high compliance.
Oil prices have recovered from recent lows, in line with a rebound in broader markets, but will remain sensitive to the pace of the global economic recovery and news about global supply.