(Bloomberg) -- Oil fluctuated near its highest prices this year after the OPEC+ alliance extended its production cuts to the end of next quarter.
West Texas Intermediate edged lower, while remaing close to $80 a barrel, after breaching the key psychological level on Friday for the first time since November. The Organization of the Petroleum Exporting Countries and its allies extended their roughly 2 million-barrel-a-day reduction through the end of June, with Russia emphasizing it would cut output and not just exports.
Traders and analysts had already priced in the widely expected OPEC+ decision, which was seen as necessary to offset a seasonal lull in demand and soaring output from other producers. The latest cuts will be returned gradually, subject to market conditions, OPEC's Secretariat said in a statement.
The announcement goes “above market expectations” and “shows robust determination to defend a price floor above $80 per barrel in the second quarter,” Jorge Leon, senior vice president of oil market research at Rystad Energy, said in a note. “If OPEC+ rapidly unwound the voluntary cuts, downside price pressure would have accentuated, taking prices down to $77 per barrel in May.”
Read More: OPEC+ Extends Oil Cuts, With Russia Bolstering Its Effort
Crude has been on a slow but steady ascent this year. Widening timespreads are signaling tighter physical conditions driven by a host of disruptions, including attacks on ships in the Red Sea. Still, delayed expectations for when the Federal Reserve will start to lower interest rates, strong production from outside OPEC+ and a shaky Chinese demand outlook have capped gains.
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