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Oil held gains in early Asian trading after OPEC and its allies agreed to a scheduled increase in production for next month, and an industry report pointed to another decline in US crude inventories.
Futures in New York traded near $77 a barrel after rising 2.4 per cent over the past two sessions. OPEC+ stuck to its plan to lift output by 400,000 barrels a day for February after it cut estimates for a surplus in the first quarter. The American Petroleum Institute reported U.S. stockpiles fell by 6.43 million barrels last week, according to people familiar with the data.
Oil has made a positive start to the year as concerns about the hit to demand from the omicron virus variant eased and major economies continue to rebound from the pandemic, although there’s still some uncertainty in China. Earlier this week, the small Chinese city of Yuzhou went into lockdown after a few virus cases, while Xi’an has seen prolonged restrictions after a flare-up.
“The move has provided some comfort to the market, as it signals that OPEC+ are not worried about the outlook in the short term,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, we still need to keep a close eye on China, given reports that another city went into lockdown.”
While OPEC+ has agreed to add 400,000 barrels a day in February, the actual volume could be much less due to some members struggling to hit production targets. Energy Aspects Ltd. Co-Founder Amrita Sen predicts the alliance will increase output by 250,000 barrels a day next month.
US gasoline stockpiles, meanwhile, increased by 7.06 million barrels last week, while inventories of distillates – a category that includes diesel – rose by 4.38 million barrels, the API reported. Government data is due Wednesday.
