Oil Hits 7-Year High after OPEC+ Sticks to Plan

Oil trades at a 7-year high after the Organisation of Petroleum Exporting Countries and allies known as OPEC+ stick to a production plan with 400,000 barrels per day increments in March 2022.

Crude oil prices initially fell as a tech rout and surging yields sank risky assets, but West Texas Intermediate prices surged over the $90 level after an Arctic blast disrupted some oil production in the Permian Basin, OANDA analyst Edward Moya said in an overnight.

The retreat in tech followed a “disastrous” earnings report from Facebook’s parent company Meta. Energy traders are continuing to buy every oil price dip, which is expected to remain the case until production from the Organization of the Petroleum Exporting Countries and allied producers, or OPEC+, catches up to demand, Moya noted.

Some analysts said the oil market is too tight and vulnerable to any shock and is fixated on production instead of short-term demand shocks, even as thousands of airline flights are cancelled.

Oil reaching $100 levels appears not too far in the future, which will still be followed by growing pressure from world leaders for OPEC+ to boost production, according to Moya. Read: Oil Prices Near 7-Year High on Tight Supply

West Texas Intermediate (WTI) crude oil closed above US$90 per barrel for the first time since October 2014, a day after OPEC+ agreed to stick to its schedule of monthly production increases, while tensions over Russian threats to Ukraine continue.

WTI crude for March delivery closed up US$2.01 to settle at US$90.27 per barrel, MarketWatch reported.

April Brent crude, the global benchmark, was last seen up US$1.56 to US$91.03, while Western Canada Select was up US$1.76 to US$76.57 per barrel. The rise came after OPEC+ agreed on Wednesday to raise quotas by another 400,000 barrels per day in March, even as the bulk of its members are unable to meet current production targets.

The inability of the group to raise production as promised led to speculation the United States and other countries may increase pressure on Saudi Arabia to increase its production to damp down high prices.

“With the group consistently missing the monthly output mark and with collective spare capacity shrinking, the “nothing to see here” signals may push consuming countries to revisit their own policy tool kits in a quest for a plan B to keep prices contained.

“Certainly, another coordinated stockpile release is likely under active consideration, though we suspect that the US may dispense with the exchange mechanism and just opt for a straightforward sale next time around,” RBC Capital Markets said in a note.

Rising geopolitical tensions as Russia, the world’s No.3 oil producer, continues to mass troops and materiel on its border with Ukraine. The threat of invasion and the potential for severe sanctions for Russia should it begin a military operation is helping support high prices.

“Several OPEC+ representatives believe the tensions between Russia and Ukraine are the cause of the upswing in prices. Pumping more oil onto the market just now will do little to change this in our view,” Commerzbank analyst Carsten Fritsch noted. #Oil Hits 7-Year High after OPEC+ Sticks to Plan.