A gas flame can be seen in the desert near the Khurai oil field near Riyadh (Saudi Arabia).
Ali Jarekji | Reuters
The global oil markets are at a critical juncture, weighing the risks of supply against rising prices and the question of whether the big producers will now turn the taps.
Brent crude reached $ 75 a barrel for the first time last week This year, it helped the benchmark track a fifth consecutive positive week and increase its annual profit by nearly 40%.
"This is definitely something we need to monitor," said Adrian Zuercher, chief investment officer of UBS APAC, to CNBC's "Squawk Box Asia."
"It will remain volatile," he added. "We expect Brent to stay between $ 70 and $ 80 at this point."
WTI also rose above $ 65 per barrel, although US inventories and US output fell somewhat off recent price momentum.
Renewed US efforts to curb Iranian production, escalating tensions in Libya, supply shortages in Nigeria and the ongoing crisis in Venezuela have led to complex and uncertain prospects for crude oil.
The coming week will be another big test, with the official expulsion of Iranian sanctions in early May and the US decision to lift all concessions that raise new questions about how Saudi Arabia and other major producers will respond.
"We now know that OPEC has this spare capacity," said Goldman Sachs Head of Commodities Research Jeff Currie to CNBC's Power Lunch, reiterating his Brent forecast of $ 70-75 for the second Quarter 201
"They started it up, they took it back, and we believe the (Iran) shock is about 900,000 barrels a day, and we've just seen OPEC, at least the core OPEC Has taken 1.8 million barrels a day off the market, "Currie added.
The decision to end the exemptions could eliminate 1.3 million barrels of Iranian exports per day, according to S & P Global Platts. According to the International Energy Agency, OPEC has approximately 3.3 million barrels per day of production capacity, of which 2.2 million barrels per day are held by Saudi Arabia.
Although this is capable of whether Saudi Arabia and Saudi Arabia The United Arab Emirates (UAE) are ready to increase supply to offset the Iranian backlog. The assurance given to the US has no specific details and no formal agreement has been reached. Both countries were also vociferous supporters of the discipline under the OPEC-plus production agreement.
There is now increasing diplomatic pressure to reverse the course.
"We will not be preventive and increase production," said Saudi Energy Minister Khalid al Falih at an event in Riyadh last week. He said he would not go beyond the agreed limit of about 10 million barrels a day, at least for now.
But what Saudi Arabia is doing next will be watched very closely.
The meeting of the Joint Ministerial Supervisory Committee on 19 May in Saudi Arabia will be Saudi Arabia's first opportunity to telegraph its intentions for the second half of the year. The meeting will also provide the stage for a critical meeting of OPEC on 25 June, just days before the expiry of the current production cutback agreement.
The OPEC-plus is expected to agree to a prolongation of the cuts in the second half of the year But the lifting of Iran's waiver and a series of other supply-side uncertainties mean that volume adjustment could be on the agenda.
Relaxing the agreed supply cuts would calm the United States and probably mitigate oil price gains. But it could also test OPEC-plus's vulnerable and highly competitive unit, and, above all, undermine free production capacity at a time of heightened geopolitical risk.
Reducing capacity would severely hamper the group's ability to deal with unforeseen supply uncertainties stemming from fragile producers such as Venezuela, where the US imposes additional sanctions that could further impact production, or Libya; where a battle in the capital threatens to spill over the country's oil production facilities.
"Losing Libya from the market would deplete capacity reserves to a very disagreeable level and would certainly be a significant risk premium for oil," said Bernstein's senior oil and gas analyst Neil Beveridge, told CNBC's Squawk Box Asia ".
The instability in Algeria, Nigeria and Sudan, as well as the recent cessation of some Russian crude oil exports to Europe are also being monitored by OPEC-plus.
"Sometimes you have to look in the rearview mirror to predict where the future is going," Khalid al Falih told CNBC in February.
"I tend to think extension of the (supply cap) is likely in the second half, but that's not automatic," he added.
"If we find out that fundamentals are worsening, you can bet by June that, just like last year, I will encourage my colleagues at OPEC to loosen their voluntary limits."
Now the market is looking to see exactly where Saudi Arabia is heading.