Oil prices fell in the beginning of this week's trading by 2% after news from Suez Canal that the salvage crews have managed to move the large container ship. The ship was blocking the global trade corridor for nearly a week which disrupted the supply chain.
Brent crude declined by 2.1% to levels of $63.19 a barrel, while WTI fell by 2.4% to levels of $59.49 a barrel.
This comes at a time when oil prices suffer from strong fluctuations, especially during the last two weeks, as recent statistics showed that the 14-day average true range (ATR) indicator accelerated to its highest level since June 2020.
The main reason for the fluctuations in the oil markets is due to the continuing concerns over the decline in demand, with the return of the high number of daily infections in several European countries like France, Germany, Britain, and Poland, which prompted strict lockdown measures.
Global markets are also waiting for the OPEC+ meeting on April 1, as expectations are in favor of maintaining the current production levels.
OPEC+ is likely to provide guidance for the production plan as of next May, as some believe that an extension of the deal to cut production may be agreed upon for another period, considering that Saudi Arabia's voluntary output cut is due to end in April.
OPEC+ may prefer not to take any measures to ease production levels amid the continued rise in US oil inventories, which reached 502.7 million barrels as data indicated last week.
At the start of the outbreak, the pace of production cuts reached its peak at 9.7 million barrels per day, approximately 10% of global production, among the major non-OPEC+ producers such as the United States, Canada, China, and Norway. The output cuts are currently at 7 million barrels, in addition to the voluntary cuts in the Kingdom of Saudi Arabia.
If OPEC+ members express the possibility of returning production to normal levels, this may cause an increase in the downside pressure on oil prices, especially after the resumption in global shipping traffic.
However, if Saudi Arabia tries to surprise the markets as it did previously with another voluntary cut, we may witness strong oil price hikes, with WTI possibly returning to $68 a barrel.