Oil’s rally accelerated on signs that OPEC+ was nearing a consensus that would keep oil output steady next month.
Futures in New York rose as much as 4.6%, putting prices on track to top $50 a barrel for the first time since February.
The potential compromise comes after the group rejected Russia’s proposal for increasing production in February.
Negotiations are ongoing and not all details were agreed, according to a delegate. Formal talks resumed for a second day.
Rising equities are providing additional support to oil prices, as strong U.S. economic data stokes optimism surrounding a recovery from the pandemic. Meanwhile, a weakening dollar is also helping boost the appeal of commodities priced in the currency.
“The market is pretty much in balance, and an extra half a million barrels a day is just enough to tip it toward oversupply,” said Gary Cunningham, director at Stamford, Connecticut-based Tradition Energy. If OPEC+ decides to hold output steady for next month, it will “ease a lot of fears about what’s going to happen in the coming months.”
OPEC+ faces a complex demand outlook as the group decides on how to move forward with its output plan.
There are signs parts of the world’s economies are staging a comeback, with a measure of U.S. manufacturing expanding last month at the fastest pace since 2018.
But other areas of the demand recovery that had seemed constant are showing some signs of wavering.
Several Asian refiners won’t be getting into long-term supply contracts for fuel sales this year, a sign the region’s energy consumption recovery is far from certain, although a cold snap in the Northern Hemisphere is aiding demand for heating fuels.
Prices –
West Texas Intermediate for February delivery rose $2.02 to $49.64 a barrel at 10:40 a.m. in New York
Brent for March settlement gained $1.83 to $52.92 a barrel
Moscow and Riyadh’s initial positions in the OPEC+ supply talks were diametrically opposed, with Saudi Arabia pushing to rescind the 500,000-barrel a day supply increase this month and Russia wanting a hike of the same amount, delegates said.
The Saudis later indicated rolling over current output levels into February would be acceptable. Moscow appears to be outnumbered but the alliance requires consensus before concluding talks.
In the U.S., expectations are for crude inventories to fall this week following three straight weeks of declines, according to a Bloomberg survey. The industry-funded American Petroleum Institute reports its figures later Tuesday ahead of U.S. government data.
