OPEC+ sticks with oil policy as prices rise towards one-year high

Daniel Fowler
February 4, 2021

Oil futures rose Tuesday, with expectations that efforts by major oil producers to reduce production will lead to tighter global supplies lifting US prices to their highest settlement in more than a year.

The API oil industry association reported U.S. crude oil inventories fell by 4.3 million barrels in the week to January 29.

AgenciesU.S. West Texas Intermediate (WTI) crude futures climbed 40 cents, or 0.7%, to $55.16 a barrel, having hit a one-year high at $55.28 a barrel earlier on Wednesday.

OPEC's Joint Technical Committee is due to meet on Tuesday while the policymaking Joint Ministerial Monitoring Committee meets on Wednesday.

In a related development, India's oil minister Dharmendra Pradhan warned on Thursday that rising oil prices could hurt global economic recovery in the aftermath of the COVID-19 pandemic that caused most economies to shrink previous year.

OPEC crude production increased for a seventh month in January, a Reuters survey found, after the group and its allies agreed to ease supply curbs further, but the growth was smaller than expected.

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The outlook for the economy has improved recently as progress in coronavirus vaccinations, moves by U.S. President Joe Biden to pass more fiscal stimulus, and improving economic data is encouraging aggressive speculators to add to their already establish bullish positions.

The JTC meeting and the ministerial meeting on Wednesday are not expected to recommend any adjustments to oil output policy, two OPEC sources said on condition of anonymity.

The Organization of the Petroleum Exporting Countries was pumping 25.75 million barrels per day (bpd) in January, the survey found, up 160,000 bpd from December.

The OPEC+ panel made no mention of changing policy, which calls for most members to hold supply steady in February and top exporter Saudi Arabia to cut output voluntarily by 1 million barrels per day this month and next.

On Tuesday, March gasoline tacked on 1.6% to $1.6160 a gallon and March heating oil added 1.7% to $1.6746 a gallon.

"Supporting factors outweigh negative developments at the moment", said PVM Oil Associates analyst Tamas Varga, citing high compliance with OPEC+ production cuts and its declared target to accelerate stock depletion.

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