Oil prices rose during early trading on Wednesday after Opec+ left plans to increase output unchanged.
Brent and West Texas Intermediate futures rose as high as $66.6 per barrel and $63.2 per barrel, with the latter rising to its highest level in two weeks.
The benchmarks later softened their gains. Brent, the international benchmark, was down 0.17 per cent at 1.45pm UAE time to $66.31. WTI was 0.03 per cent at $62.92 per barrel.
Opec+, led by Saudi Arabia and Russia, maintained its current level of curbs on the back of “continuing recovery in the global economy”.
The group plans to increase output by 350,000 bpd in May and June and will add 450,000 bpd in July.
Saudi Arabia, which had supported the group’s restrictions by volunteering to cut 1 million bpd until April, will phase out the curbs from May onwards.
Riyadh will cut 250,000 bpd in May, 350,000 bpd in June and 400,000 bpd in July.
Opec+ delayed a ministerial meeting of producers set for today to June 1 and urged producers to remain “vigilant and flexible” amid uncertain market conditions.
“The decision to hold will provide some relief to markets in the form of stable volumes rather than the surprise production decisions that Opec+ has endorsed several times this year,” said Edward Bell, senior director, market economic at Emirates NBD.
However, the evolving situation with respect to demand may cause complications for the group’s strategy to raise output.
India, the world’s third-largest consumer of oil, is in the throes of a devastating second wave of the pandemic, which has crippled its already fragile health infrastructure.
Refiners are cutting back on processing rates, as workers from these large facilities flee to their hometowns in the Indian hinterland to escape the spread of the virus.
With various state governments implementing curfews and containment strategies, India’s demand is likely to take a hit. The country imposed one of the strictest lockdowns in the world last year, at the height of the pandemic, which led a severe curtailment of crude demand.
“The barrels will be coming onto a market that is beset by substantial demand risks, not least of which are centred on India where expanding lockdowns risk crashing oil demand,” said Mr Bell.
For now, oil prices are steady, in spite of a stronger dollar, and higher crude inventories in the US.
“A benign FOMC [Federal Open Market Committee] and the expectations of impressive US data to come this week and its flow-on impact of US consumption appear to be trumping concerns over Covid-19 in India,” said Jeffrey Halley, senior market analyst, Asia Pacific, at Oanda.