Oil Climbs Again as Investors Assess OPEC+ Tensions
Oil advanced above $84 a barrel as traders assessed the possibility that OPEC+ won’t step up the pace it’s increasing supply, while awaiting the latest insight into U.S. crude stockpile trends.
West Texas Intermediate climbed 0.3%, extending a three-day gain, as Brent rose. The Organization of Petroleum Exporting Countries and its allies meet Thursday to set output policy. Members including Kuwait have said that there’s no need add barrels at a faster clip even though key consumers including the U.S. have urged them to do so. Should that happen, the Biden administration may release crude from strategic reserves, according to RBC Capital Markets.
The backdrop to the cartel’s upcoming gathering has been marked by fast-falling U.S. oil inventories, which have sunk to a three-year low at the key storage hub in Cushing, Oklahoma. Later Tuesday, the American Petroleum Institute will issue estimates for Cushing as well as nationwide holdings.
Oil hit a seven-year high in October as consumption picked up with the pandemic fading. That’s drained stockpiles just as a gas-centered energy crunch fanned additional demand. Among recent estimates, Bank of America Corp. says Brent crude will rally to $120 a barrel by the end of June 2022.
“It’s likely OPEC+ will adhere to its current increase of 400,000 barrels a day, turning a deaf ear to the United States, and the market has already priced this in,” said John Driscoll, director at JTD Energy Services Pte, based in Singapore. “On top of that, gas-to-oil switching will underpin market fundamentals.”
Major crude importer Japan said oil’s surge has fueled mounting concern for consumers. While ruling out tapping into its own reserves, at least for now, Tokyo was coordinating its position with the International Energy Agency and the U.S., Trade and Industry Minister Koichi Hagiuda told reporters.
The crude market’s overall bullishness is reflected in strongly backwardated pricing patterns, with near-term contracts trading above those further out. A barrel of WTI for this coming December is more than $12 costlier than a barrel for the same month next year.
BP Plc, the last of the western supermajors to report quarterly earnings, said it would buy back an extra $1.25 billion of shares, using the proceeds of surging prices. Following in its peers’ footsteps, it reported a big jump in profit.