Oil's biggest weekly rally of 2023

Oil extended its rise for a third week on OPEC+’s decision to cut production and a drop in U.S. inventories. U.S. crude rose above $80 a barrel, extending its weekly gain of over 6 percent, the biggest rally of the year. Oil notched its third straight weekly gain after a surprise supply cut by OPEC+ and a drop in U.S. inventories tightened the market outlook. Prices had surged 6.3 percent on Monday, their biggest rally this year, following OPEC+’s decision to cut daily production by more than 1 million barrels starting in May. Saudi Arabia also increased the price of all oil it sells to customers in Asia after its decision to cut production. OPEC+ intervention surprises short sellers Crude oil rose 26 percent from its intraday low reached in mid-March, when banking turmoil led to a flight from risky assets. While prices were already recovering on rising Chinese fuel demand and a weaker dollar, OPEC+’s intervention surprised short sellers and strengthened the recovery. Meanwhile, the resumption of talks by top diplomats from Saudi Arabia and Iran is easing tensions that have shaken oil markets and fueled proxy wars in the Middle East for decades. In addition to tight supply, U.S. crude oil inventories fell by 3.7 million barrels last week, while gasoline and distillate stocks also declined. Despite the overall picture, investors will continue to monitor U.S. economic data for more clues about recession risks and the Fed’s rate hike path. “OPEC+’s physical crude oil cuts will clash with the Fed’s rate hikes designed to rein in demand and pose macro risks. We continue to maintain our constructive view,” Bank of America analyst Francisco Blanch said in a client briefing.