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Thursday, February 15, 2024

Oil gains around 1% after OPEC+ holds line on supply

Oil prices rose around 1% on Friday, staging a partial recovery after OPEC+ producers rebuffed a U.S. call to raise supply and instead maintained plans for a gradual return of output halted by the pandemic.

Oil prices rose on Friday. Brent crude rose 36 cents, or 0.45%, to $80.90 a barrel by 0912 GMT after touching $81.79. U.S. West Texas Intermediate crude gained 60 cents, or 0.76%, to $79.41 after rising as high as $80.17.

The OPEC+ group of major producers agreed on Thursday to stick to their plan to raise oil output by 400,000 barrels per day (bpd) from December, ignoring calls from U.S. President Joe Biden for extra output to cool rising prices.

Top OPEC producer Saudi Arabia dismissed calls for speedier increases from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+, citing economic headwinds.

Read more: OPEC+ oil output policy to remain unchanged from September

How demand has been affected by Covid?

The group has been restricting supply after the COVID-19 pandemic led to evaporation of demand.

But with U.S. retail gasoline prices not far off $4 a gallon, considered a pressure point for American drivers, the onus is on the White House after Biden on Saturday urged major G20 energy producers with spare capacity to boost output.

The White House said Washington would consider a full range of tools at its disposal to guarantee access to affordable energy after the OPEC+ meeting.

The focus will now shift to whether the United States and other countries opt to release oil from strategic petroleum reserves (SPR), UBS oil analyst Giovanni Staunovo said in a note.

“While such a decision would result in price setbacks, the SPR can only fill the gap during temporary production disruptions and not fix structural issues of underinvestment and rising demand,” Staunovo said. The bank expects Brent crude to continue climbing to $90 a barrel over the coming months.

Read more: OPEC: Unsettled by new realities of oil production

Oil prices recently touched seven-year highs but fell this week after an increase in U.S. inventories and signs that high prices could encourage higher production elsewhere.

Brent is on track for a weekly decline of nearly 4%, the second straight week the contract has fallen. U.S. oil is heading for a decline this week of nearly 5%.

Reuters with additional input by GVS