Oil climbed ahead of a crucial OPEC+ meeting, with the alliance expected to agree on a coordinated increase in output as the pandemic’s impact on the market recedes.
Brent futures rose 1% after three days of losses. The widespread view among the Organization of Petroleum Exporting Countries and its allies is that the oil market can absorb extra barrels, according to people familiar with the matter.
Brent climbs after three consecutive daily losses
Oil has staged a powerful rally this year, driven by OPEC+ curbs — including unilateral cuts by Saudi Arabia — and a vaccine-aided rebound in demand. That strength has paved the way for the alliance to unleash more barrels, with OPEC Secretary-General Mohammad Barkindo saying Tuesday that both the wider economic outlook and oil-market fundamentals continue to improve. The group could return the bulk of the 1.5 million-barrel-a-day hike that’s up for debate.
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“The question is not ‘if’ but rather ‘by how much’ the petro-nations will ease supply curbs,” said Norbert Ruecker, an analyst at Julius Baer Group Ltd. “The economic recovery and the likely leisure and travel activity bounce will fuel oil demand and extra supplies will be needed to avoid an over-tightening.”
Brent for May settlement climbed 1% to $63.32 a barrel as of 1:26 p.m. in London. West Texas Intermediate for April delivery gained 1.1% to $60.39 a barrel
There are two parts to the potential production ramp-up that OPEC+ will discuss. The first is whether the cartel will proceed with a 500,000-barrel-a-day collective increase in April. The second is the question of how Saudi Arabia could phase out its extra reduction of 1 million barrels a day.
The gathering pace of recovery presents “the perfect opportunity for OPEC+ to raise production,” Australia & New Zealand Banking Group Ltd. said in a note, predicting that the group will agree to add 750,000 barrels a day.
Bulls may draw comfort from further signs of shrinking stockpiles in Europe. Crude inventories in the key ARA hub have fallen to their lowest level since May, according to Genscape.
Still, the American Petroleum Institute reported a weekly expansion in U.S. crude inventories of more than 7 million barrels, according to people familiar with the data. If confirmed by the government’s tally later on Wednesday, that would be the largest weekly build since December. The API figures showed drops in gasoline and distillate stockpiles.
Iran is reaching out to its old customers in Asia to gauge interest in its crude as the Persian Gulf oil producer ramps up diplomacy in a bid to get U.S. sanctions lifted.
Exxon Mobil Corp. expects to cut about 300 jobs in the Asian oil-trading hub of Singapore by the end of 2021, part of a global retrenchment that was announced last year.
There’s a rarely-seen buyer in town and Asian oil traders are taking notice: U.S. refiners have started showing interest in medium-quality crude from Asia such as Sokol and ESPO produced in Russia’s Far East.
Ten rockets targeted an airbase in western Iraq that hosts U.S.-led coalition troops, the latest in a spate of attacks that have raised tensions days before a visit by Pope Francis.
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