Although Brent crude, the global benchmark, closed on the day slightly off its best level of $67, oil experts said the surge last month was the result of Saudi moves to keep excess oil off the market as part of the OPEC+ alliance of producers.
One analyst said: “OPEC+ will be giving themselves a big pat on the back because the strategy is working, not least because of the big cut.”
The rise last month came as good news on the global rollout of COVID-19 vaccines coincided with signs that oil demand was picking up, and oil in storage was being drained at an increasing rate as economic activity resumes.
The strength of global financial markets, buoyed by the Biden administration’s $1.9 trillion stimulus package in the US, was further evidence of the recovery, with the key S&P index turning in its best performance in four months.
Oil output from OPEC countries fell in February for the first time since last summer, an indication that Saudi-led policy was working.
“So far, the members of the alliance have been cooperating and implementing the cuts in exemplary fashion,” analyst Eugen Weinberg of Commerzbank said.
Oil markets will face a test this week when ministers from OPEC+ meet to decide whether to put oil supply back on the market.
The Saudi output cut expires at the end of March, and other countries, notably Russia, are keen to increase production to gain the benefit of rising prices.
Oil officials in the Kingdom are awaiting data from the OPEC technical committee before committing themselves to reinstating the output. One option could be a phased re-introduction of output in coming months.
Kingdom’s surprise output cut buoys market, along with rising demand and good news on vaccines
Oil prices rose nearly 20 percent in February as Saudi Arabia’s “surprise” voluntary cut of 1 million barrels took effect in an increasingly optimistic market for crude.