[Editor’s note: This report is an excerpt from the Stratas Advisors weekly Short-Term Outlook service analysis, which covers a period of eight quarters and provides monthly forecasts for crude oil, natural gas, NGL, refined products, base petrochemicals and biofuels.]


The price of Brent crude oil closed last week at $69.36 after starting the week at $64.63, and WTI closed last week at $66.09 after starting the week at $61.66. Oil prices have not been at this level since May 2019.

The oil markets reacted strongly to the news coming out of the OPEC+ meeting held on March 4 that production would just increase slightly through April with only Russia and Kazakhstan being allowed to increase production—130,000 bbl/d for Russia and 20,000 bbl/d for Kazakhstan. Additionally, Saudi Arabia stated that it would be extending its voluntary product cut of 1 million bbl/d through April.

There were other significant developments last week that will continue to have an impact on oil prices, including the following:

  • The U.S. Senate passed the $1.9 trillion recovery/stimulus package on a partisan basis with all democrat senators voting for the package, while none of the republican senators voted for the package. The recovery/stimulus package now goes back to the U.S. House of Representatives for approval before going to the White House for signature by President Biden. This would seem to be the last round of a major recovery/stimulus package until Congress considers a major infrastructure bill.
  • On top of the additional fiscal support, the U.S. economy continues to open with the level of vaccination reaching 2 million per day, and the intention for all adults to have access to the vaccine by end of May. Additionally, several states are removing COVID-19 restrictions. Furthermore, the latest U.S. jobs report indicated that U.S. added 379,000 jobs in February, which exceeded expectations that were closer to 2000,000 new jobs.  
  • China announced as part of its 5-year plan that it is targeting a minimum of 6% economic growth for 2021 and is ramping up support for R&D and defense spending. China also reiterated its intention to reach peak emissions by 2030—and that plans for reaching the goal would be completed this year.
  • In addition to the above, there was an attack on Saudi Arabia that took place on the morning of March 7 and was undertaken by Yemen’s Houthi fighters, who are aligned with Iran. Among the targets hit were a petroleum storage facility at Ras Tanura. This attack is the latest in the efforts of the Houthis to ramp up its attacks against Saudi Arabia including mines in the Red Sea—all with the intention of damaging the oil-related infrastructure.

All the above factors provide upward support for oil prices. However, some (or most?) of the positive news is already reflected in the oil price. Additionally, there continues to be concerns about rising interest rates, which could lead to the Federal Reserve moving away from its accommodating monetary policies. We do not expect that this is likely to happen anytime this year or even next year. Instead, we think the Federal Reserve will be comfortable with inflation running above 2% for a period of time. Furthermore, we think the Federal Reserve will, if necessary, take steps to keep interest rates from moving too high. Another mitigating factor for increased interest rates is the potential for increased buying of treasury bonds with the rates moving back to the 1.5% level.

What Is Affecting Oil Prices the Week of March 8, 2021? Stratas Advisors Infographic

About the Author:

John E. Paise, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.