Oil climbed ahead of an OPEC+ meeting that may endorse another modest lift in output, with traders speculating that the actual increase delivered by members could again fall short of the headline figure.
West Texas Intermediate edged toward the highest level since 2014 after rallying 17% in January. Global benchmark Brent pushed closer to $90 a barrel, with prices steeply backwardated in a reflection of market tightness.
The Organization of Petroleum Exporting Countries and its allies convene later on Wednesday, and are expected to ratify another 400,000 barrel-a-day increase in supply for March. If so, that would stick with the established pace at which they have been easing output curbs imposed at the height of the pandemic. Still, there have been consistent signs in recent months that the alliance has not been able to meet its collective production target in full.
“Crude appears to have baked in OPEC+ staying the course with a 400,000 barrels per day monthly hike,” said Vandana Hari, founder of consultant Vanda Insights in Singapore. “A ratification will be virtually a non-event for the oil complex. But an element of bullishness over the growing shortfall in OPEC+’s supply against its monthly targets will persist.”
Crude has roared higher in 2022 after jumping 55% last year. The surge has been driven by the steady revival in demand from the impact of the pandemic, lower stockpiles, and sporadic interruptions to supplies. Tensions over Ukraine, driven by concerns that Russia may invade its smaller neighbor, have also boosted prices in recent weeks. Moscow says it has no plan to send in troops.
Prices
-WTI for March delivery was 0.3% higher to $88.46 a barrel on the New York Mercantile Exchange at 6:10 a.m. in London.
-Brent for April settlement added 0.3% to $89.43 a barrel on the ICE Futures Europe exchange.
-Goldman Sachs Group Inc. has warned that after the recent surge in prices, OPEC+ may choose to deliver more supply than expected this time around. Nevertheless, the bank said that it remains optimistic oil’s rally will go on.
“A bigger boost is hard to fathom when OPEC+ is struggling to keep up with the current targets,” Hari said.
Oil markets remain in backwardation, a bullish pattern marked by near-term prices commanding a premium to those further out. Brent’s prompt timespread — the gap between its nearest two contracts — was $1.39 a barrel in backwardation, up from $1.22 a barrel a week earlier.
The industry-funded American Petroleum Institute reported on Tuesday U.S. oil inventories fell 1.65 million barrels last week, according to people familiar with the figures, which also showed a draw at the key storage hub in Cushing. A drop, if confirmed by official data later Wednesday, would be a surprise. A Bloomberg survey of analysts calls for a build of 1.8 million barrels.
Oil traders were also tracking a cold blast across the central U.S. that may boost energy demand. The National Weather Service warned the system was packing heavy snow, sleet and freezing rain and would be prolonged. There would be several rounds of winter weather lasting through Thursday, it said.
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