Global Oil Prices Extend Gains: Jim Cramer Says Crude 'In Driver's Seat' For Stock Market Direction

With bond yields easing and stock futures surging, Jim Cramer is watching oil markets Monday as U.S. crude prices hold near the highest levels in more than a year.
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Global oil prices traded higher Monday, but remained just shy of their recent 13-month highs, as investors bet on a faster recovery in energy demand and a potential easing in OPEC production cuts later this week.

Factory activity data in major economies around the world, including China, Japan and the European Union, showed solid gains in February, with a surge in commodities over the past three weeks adding to input price increases and potential inflation concerns.

Oil has ridden that trajectory for much of the past six months, with U.S. crude prices rising around 73.5% since the beginning of November. That's added to pressure on OPEC members to ease their agree schedule of production cuts, which are taking around 7.2 million barrels of crude from the market each day, when cartel members -- and non-member allies such as Russia -- meet later this week.

"Clearly, given the strength we have seen in the market there will be growing pressure from within the group to ease cuts," said ING's head of commodity strategy Warren Patterson. "While the market is expecting the group to increase output from April, the big unknown is by how much."

"The group will need to be careful, they will want to make sure they do not surprise the market by easing too much. There is a large amount of speculative money in oil at the moment, so they will want to avoid any action that will see them running for the exit," he added. 

"Meanwhile the group needs to make sure that the market can absorb this additional supply, and for that they need to ensure that their assumptions around the demand recovery are fairly accurate."

WTI crude futures for April delivery, the benchmark for U.S. oil and gas prices, were marked 59 cents higher on the session at $62.10 per barrel, a level last seen in early January 2020.

Brent crude contracts for May delivery, which are more tightly-aligned to global prices, rose 61 cents per barrel to $65.02.

ExxonMobil  (XOM) - Get Report shares, meanwhile, were marked 1.75% higher at $55.32 each while its larger rival, Chevron Corp.  (CVX) - Get Report rose 1.5% to $101.50 each.

The weekend passage of President Joe Biden's $1.9 trillion stimulus bill by House lawmakers is also providing upward pressure to commodity prices and energy demand bets, as is the FDA's approval for Johnson & Johnson's  (JNJ) - Get Report single-shot coronavirus vaccine.

We see oil demand rebounding at more than twice the rate suggested by recent history which indicates a relationship where every 1% of global economic growth equates to about 0.5% growth in oil demand," JPMorgan analyst Natasha Kaneva said in a recent client note. "Our economists now anticipate global economic growth to average 6.4% this year and we project oil demand expanding at a 6.7% rate as increased mobility amplifies the recovery."

"Despite this robust growth, we still see global demand only breaching the coveted 100 mbd level in December 2021," she added.