By Jessica Resnick-Ault
NEW YORK (Reuters) – Oil prices rose more than 1% on Thursday, extending a rally from the previous session, on escalating unrest in OPEC+ oil producer Kazakhstan and supply outages in Libya.
Global benchmark Brent crude futures rose $1.09, or 1.3%, to $81.80 a barrel by 1:06 p.m. EST (1806 GMT), their highest since late November. U.S. West Texas Intermediate (WTI) crude gained $1.40, or 1.8%, to $79.25, its highest since mid-November. The contract touched a session high of $80.24.
“OPEC production, while it did increase, disappointed the market – it is not going to be enough to keep up with demand,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Brent’s six-month backwardation stood at about $4 a barrel, its widest since late November. Backwardation is a market structure where current prices trade at a premium to future prices and is usually a sign of a bullish market.
Russia sent paratroopers into Kazakhstan on Thursday to help quell a countrywide uprising after deadly violence spread across the tightly controlled former Soviet state.
There were no indications that oil production in Kazakhstan has been affected so far.
Meanwhile in Libya, oil output was at 729,000 barrels per day, the National Oil Corp said, down from a high of more than 1.3 million bpd last year, owing to maintenance and oilfield shutdowns.
Prices have rallied this week despite OPEC+ sticking to an agreed output target rise and a surge in U.S. fuel stockpiles.
Government data on Wednesday showed that U.S. gasoline inventories surged by more than 10 million barrels last week, the biggest weekly build since April 2020, as supplies backed up at refineries because of reduced fuel demand. [EIA/S]
Crude inventories in the United States, the world’s top consumer, have fallen for six consecutive weeks by the end of the year to 417.9 million barrels, their lowest since September, the data showed.
Benchmark U.S. crude futures suggest supplies will remain tight early in the new year. A barrel of oil for delivery in June is selling at a $4.10 premium to a barrel for delivery in December, the highest since Nov. 2, a signal of near-term rising demand.
OPEC+, a group that includes members of the Organization of the Petroleum Exporting Countries, Russia and other producers, agreed on Tuesday to add another 400,000 bpd of supply in February, as it has done each month since August as it gradually relaxes 2020’s cuts as demand recovers from the pandemic.
However, the increase in OPEC’s output in December has again undershot the rise planned under the OPEC+ deal, a Reuters survey found on Thursday, highlighting capacity constraints.
“Our reference case now assumes the alliance will fully phase out the remaining 2.96 million bpd of oil production cuts by September 2022,” JP Morgan analysts said in a note.
The bank forecast Brent prices to average at $88 a barrel in 2022, up from $70 last year.
Meanwhile, the world’s top oil exporter, Saudi Arabia, cut the official selling price for all grades of crude it sells to Asia in February by at least $1 a barrel, three sources with knowledge of the matter said.
Oil extends rally on Kazakhstan unrest and Libyan outages