Oil, across both major crude oils, was able to record notable gains at the opening of the new week's trading. Brent crude oil recorded a level of $83.74 per barrel at the opening, with gains of approximately 0.5%, which represents the highest opening since late last January.
West Texas Intermediate crude oil was also able to open at the highest level since early last November, at $80.07 per barrel as well. However, both crude oils reversed and reduced those gains as the purchasing momentum quickly receded during the early morning hours.
Today's oil gains came after the decision of the Organization of the Petroleum Exporting Countries and its ally Russia (OPEC+) to extend the voluntary reduction in oil production during the second quarter by 2.2 million barrels per day.
The Kingdom of Saudi Arabia is committed to cut its oil production by one million barrels per day, and Russia will also maintain a reduction in its exports by 471 million barrels.
While this decision came in line with market expectations and did not present any surprise, this was reflected in the rapid decline in morning gains. As the markets are still looking for more signals that help support prices.
The markets received some support last Friday with more hope for the Federal Reserve to cut interest rates at the upcoming May and June meetings after hope for that faded at the March meeting, and this was reflected in the largest decline in US Treasury bond yields since mid-February.
This hope, in turn, came at the cost of a further, larger-than-expected contraction in US manufacturing activity in February, according to a ISM manufacturing PMI report. But on the other hand, manufacturing activities continued to grow for the fourth month in a row in China, according to S&P Global, and the markets welcomed the result.
Markets are also closely monitoring what is happening in the Middle East, with contradictory signals about the possibility of reaching a potential ceasefire that may last for more than a month, in light of local and international pressures to contain the conflict. However, this talk about a temporary peace has been met with a number of bloody developments over the past few days, coinciding with the threat of expanding the scope of ground operations, which may exacerbate the conflict in a way that may not be possible to contain.
This week is also full of very important economic data as well. We await the numbers of service purchasing managers for both China and the United States, with expectations that the growth of service activities will slow slightly in China. We are also awaiting a set of labor market data from the American markets, the latest of which is the non-agricultural jobs numbers, which are expected to have added 190,000 jobs in February.
While the weaker than expected numbers, especially for the labor market, may be supportive of the oil markets, with more hope about the Federal Reserve cutting interest rates in its next two meetings.
