OPEC+ meets this week; U.S. EIA supply data due Wednesday
Oil futures rose Tuesday, with expectations that efforts by major oil producers to reduce production will lead to tighter global supplies lifting U.S. prices to their highest settlement in more than a year.
The Organization of the Petroleum Exporting Countries and other major producers, a group known as OPEC+, expect output cuts to keep the oil market in a supply deficit through the year, even as the producers lowered this year’s outlook on demand growth, a document seen by Reuters showed Tuesday.
The document also revealed that the producer alliance’s Joint Technical Committee, which held a meeting Tuesday, expects the year’s oil market deficit to peak at 2 million barrels per day in May, Reuters said.
An OPEC+ ministerial meeting will be held Wednesday to review the oil market.
Saudi Arabia’s 1 million barrels per day February through March unilateral output cut provided a tailwind for oil prices on Monday, said analysts at Sevens Report Research, in their latest newsletter.
“Additionally, easing coronavirus infections, continued rollout of vaccines, and stimulus hopes are propping up the demand outlook for the months and quarters ahead,” they said. “Bottom line, oil prices are in a well-defined uptrend and barring any fundamental surprises, should continue to move up toward $60 [a] barrel near term.”
West Texas Intermediate crude for March delivery CL.1, 1.04% CLH21, 1.04% rose $1.21, or 2.3%, to settle at $54.76 a barrel on the New York Mercantile Exchange, with prices logging the highest front-month contract settlement since January 23, 2020, FactSet data show.
April Brent crude BRN00, 1.20% BRNJ21, 1.20%, the global benchmark, added $1.11, or 2%, at $57.46 a barrel on ICE Futures Europe to post the highest finish since February 21 of last year.
Oil has been helped by surveys indicating members of the OPEC+ alliance lifted output in January by less than was allowed under their agreement.
No changes in policy are expected from the group on Wednesday, “with OPEC+ having already agreed on output levels for the remainder of the first quarter earlier this year,” said Warren Patterson, head of commodities strategy at ING, in a note.
Meanwhile, global stocks remained firm on Tuesday, with benchmark U.S. stock indexes moving up as investors have been encouraged by news on the pace of vaccine rollout in the U.S. and the prospect of more fiscal aid from Congress, which may speed the economic recovery and energy demand.
Weekly data on U.S. petroleum supplies will be released by the American Petroleum Institute late Tuesday, with official government data from the Energy Information Administration due Wednesday.
On average, the EIA is expected to report a decline of 2.4 million barrels in crude supplies for the week ended Jan. 29, according to an S&P Global Platts survey. The survey also showed expectations for a weekly inventory climb of 1.5 million barrels for gasoline, but distillates are expected to fall by 1.3 million barrels.
On Tuesday, March gasoline RBH21, 2.17% tacked on 1.6% to $1.6160 a gallon and March heating oil HOH21, 0.97% added 1.7% to $1.6746 a gallon.
March natural gas NGH21, -0.21% tapped a high above $3 per million British thermal units Tuesday for the first time since November, but has since given up those gains. The contract settled 0.2% lower at $2.845 per million Btus.
Prices saw a more than 11% climb Monday. The big East Coast storm and cold temperatures had provided a lift to prices, according to Colin Cieszynski, chief market strategist at SIA Wealth Management.