Brent crude oil futures reached a three-year peak on Tuesday, while U.S. benchmark crude was close to 2014 peaks. This is because the OPEC+ group producers remained true to their planned output increase and not pumping more crude.
July saw OPEC+ agree to increase output by 400,000 barrels/day (bpd) until April 2022, in order to eliminate 5.8 million bpd from existing production cuts.
Brent crude oil was $1.17 higher, or 1.4% at $82.43 per barrel by 1345 GMT. It had risen 2.5% Monday. After gaining 2.3% in the previous session, U.S. West Texas Intermediate oil (WTI), rose $1.10 or 1.4% to $78.72.
Already, oil prices have risen more than 50% in the past year. This has created inflationary pressures that countries such as India and the United States are worried will hamper recovery from the COVID-19 pandemic.
Late last month, the OPEC+ Joint Technical Committee said that it expects a 1.1million bpd supply shortfall this year. This could lead to a 1.4million bpd surplus next.
Despite pressure to increase output, OPEC+ was concerned about a fourth wave of COVID-19 infection in the global demand recovery. A source told Reuters just before the vote.
Barclays stated in a note that “the (price) movement looks a bit oversized given that the ministers just confirmed the decision announced July. But it shows how tight market is, reinforcing our view of asymmetrical price action with risks to the upside at inventory levels.”
A preliminary Reuters poll indicated that U.S. crude oil inventories and distillate inventories may have dropped last week.
