By Adedapo Adesanya
Profit-taking amid continued tight supply weakened oil prices on Wednesday as producers stuck to the planned moderate output increases for March.
The Organisation of the Petroleum Exporting Countries and its influential energy partners known as OPEC+ swiftly decided to green-light the return of 400,000 barrels per day for March.
The move, widely expected by energy analysts, marks a continuation of the group’s strategy to gradually reopen the taps.
Led by Saudi Arabia and non-OPEC leader Russia, the energy alliance is in the process of unwinding record supply cuts of roughly 10 million barrels per day.
The historic production cut was put in place in April 2020 to help the energy market recover after the coronavirus pandemic cratered demand for crude.
OPEC+ has faced pressure from top consumers such as the US and India to pump more to reduce prices and aid the economic recovery.
The group has resisted calls for speedier increases despite higher oil prices.
With prices expected to be bullish in the long term, traders seized the opportunity to take profits.
This lowered the price of Brent crude futures yesterday by 24 cents or 0.27 per cent to $89.27 per barrel and slashed the United States West Texas Intermediate (WTI) crude futures by 39 cents or 0.44 per cent to $87.87 per barrel.
Earlier in the session, prices had gained after the Energy Information Administration (EIA) reported a crude oil inventory decline of one million barrels for the week to January 28.
The US agency said that at 415.1 million barrels, crude oil inventories were close to 10 per cent below the five-year average levels for this time of the year.
A day before the EIA released its report the American Petroleum Institute estimated the US crude oil inventories had declined by 1.645 million barrels, reinforcing the perception that the oil market was getting tighter while demand was on the rise.
Also pressuring prices was data from the world’s largest economy which showed that US private payrolls fell for the first time in a year in January.
This raises the risk of a sharp decline in employment that would deal a temporary setback to the labour market and thereby impacting demand.
Prices were also pressured on Wednesday after Iran’s Oil Minister, Mr Javad Owji said the country was ready to return to the oil market as quickly as possible.
He said that the global market needs more Iranian oil, which could help bring down high prices.
