By Adedapo Adesanya
Crude oil grew on Tuesday as the Organisation of the Petroleum Exporting Countries, and its allies (OPEC+) are considering extending voluntary output cuts into the second quarter to provide additional support.
This information caused the price of Brent crude to gain 99 cents or 1.2 per cent to sell at $83.52 a barrel, as the price of the US West Texas Intermediate (WTI) crude went up by $1.24 or 1.6 per cent to $78.82 per barrel.
Reuters reported that OPEC+ could also keep the additional cuts in place until the end of the year to provide support for the market.
Last November, the then 23-member group (Angola has since exited) agreed to voluntary cuts, totalling about 2.2 million barrels per day for the first quarter this year, led by Saudi Arabia rolling over its voluntary cut.
Oil prices have found support this year from rising geopolitical tensions due to attacks by the Iran-aligned Houthi group on Red Sea shipping, although concern about economic growth and high-interest rates has weighed.
Extending the output cuts into the second quarter is “likely” with the possibility of a longer extension until the end of the year also on the table.
Market analysts noted that OPEC is targeting prices around $85 a barrel on Brent, but if prices remain below that, the cartel will curtail production until the year-end.
OPEC+ has implemented a series of output cuts since late 2022 to support the market, amid rising output from the US and other non-member producers and worries over demand as major economies grapple with high interest rates aimed at curbing sticky inflation.
OPEC+ is facing a flood of US output and the world’s largest crude producer has become the biggest European oil and liquefied natural gas supplier after Russian sanctions and Middle East supply disruptions due to Red Sea attacks.
Supporting came from the supply side after Israel and Hamas, as well as Qatari mediators, all sounded notes of caution on Tuesday about progress toward a truce in Gaza, after US President Joe Biden said he believed a ceasefire could be reached in under a week to halt the war for Ramadan.
Yemen’s Houthi spokesperson said the group’s operations in the Red Sea would stop only when Israeli “aggression” against Gaza ends.
Houthi missile and drone attacks on international shipping have driven up the cost of transporting energy products and contributed to a tighter market.
Also on Tuesday, Russia announced a six-month ban on petrol exports from March 1 to compensate for rising demand and to allow for refinery maintenance.