Oil prices continue to rise as production is restricted

Mohammed Abdelkhalik
February 2, 2021
oil prices

Ad Disclosure

Oil Prices Outlook: 3rd February 2021

Oil prices rose during today’s trading (Tuesday, February 2) in the European market, to maintain their strong gains for the second consecutive session.

US crude reaches a new record with its highest level in about a year. Also, this commodity is reaching its highest level in three weeks. This rise was supported by the decline in the US dollar index according to the inverse relationship Between them.

And what provided more support to prices recently, the increase in OPEC Plus production was less than expected during January, as part of the group’s continuing efforts to work to reset the market balance.

West Texas Intermediate crude (US crude) rose by about 1.8% until 09:10 GMT. The trading price of a barrel was around the level of $ 54.41, the highest since February 2020.  In today’s session, it was opening at $ 53.45, and the lowest price was at $ 53.45 per barrel.

OILUSD chart - 3rd Febuary 2021

International crude (Brent crude), which is considered the main measure of prices, rose by about 1.6% to the level of 57.22 dollars per barrel, the highest since last 13th January, compared to the opening level at 56.34 dollars, and reached early in the session the lowest price at 56.22 dollars per barrel.

After trading yesterday, Monday, US crude managed to achieve gains of 2.6%, and the benchmark Brent crude oil also rose by 2.4%, which is the largest daily gain since the eighth of January.

Oil prices rose after the USD decline

In terms of dollar index trading, the index declined during today’s trading session by more than 0.1%, in the first daily loss in the last three sessions. This decline came as a result of remarkable sales activity aimed at reaping profits after the dollar reached its highest levels in eight weeks earlier in trading. At 91.06 points, reflecting the halt in buying the US currency against most global currencies, which currently contributes to supporting the prices of oil and other commodities priced in dollars.

In addition to the corrections, which are negatively pressuring the dollar’s ​​movements at present, the strong gains made by US stocks on Wall Street, which reduced fears of entering the US market in a broad wave of a downward correction.

It is expected, later today, that the group of Republicans, members of the US Senate, will resume their meeting with Democratic President “Joe Biden” at the White House to negotiate his plan for relief from the Corona pandemic, amounting to 1.9 trillion dollars.

According to the latest figures issued by the World Health Organization, the number of people infected with the Coronavirus has reached more than 102.58 million people and has claimed 2,222,647 lives in 223 countries around the world.

Restrict production

A survey conducted by the “Reuters” agency showed that OPEC crude production increased during January for the seventh consecutive month, but the increase was less than expected. The Organization of Petroleum Exporting Countries “OPEC” pumped about 25.75 million barrels per day in January, an increase of only 160 thousand barrels per day from Dec.

During the last meeting of the “OPEC Plus” coalition, which was held on the third of last December, members of the group agreed to give up a planned increase in production by about 2 million barrels per day, with the approval of increasing supplies by only 500 thousand barrels per day as of January 2021.

The Kingdom of Saudi Arabia, “the largest oil producer in OPEC”, is also set to start implementing its previous commitment to voluntarily reduce production by about one million barrels per day from February to the end of next March. This reduction is expected to quickly balance the market and provide more support. For prices hit hard by the outbreak of the viral pandemic.

Author Mohammed Abdelkhalik

Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.