Oil On Track To Spike Higher? Report Says OPEC+ All Set To Extend 2 MBOE/Day Output Cut At Least Until Middle Of Year

Oil has rebounded nicely this year and yet OPEC+ is leaning toward keeping supply curbs in place, a report said on Sunday.

What Happened: OPEC+ members have agreed to extend production cuts until the end of the second quarter, Bloomberg reported, citing sources. The 22-nation, oil-producing coalition will continue to implement production cuts of around two million barrels per day, the report said.

A Reuters report speculated about the same last week. Citing sources from the coalition, the report said member nations would likely agree to keep output cuts until the end of the year. The production cuts, totaling 2.2 million barrels per day and announced in November last year, were in effect during the first quarter, with Saudi Arabia voluntarily reducing its production.

The OPEC+ meeting, which was originally planned to be held in early February, was postponed.

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Why It’s Important: Oil, which had a down year in 2023, has made a comeback in the first two months of the year. The WTI-grade crude oil ended 2023 down about 8.6% but has tacked on 11.6% so far this year.

Oil’s rally this year has been precipitated by supply-side concerns. The skirmish around the Red Sea, which began around mid-October, has increased concerns regarding supply disruption. Iran-backed Houthi rebels in Yemen launched missile attacks and armed drones targeting Israel, leading logistics companies to reroute oil shipments along a longer and more indirect route.

On Friday, the WTI-grade crude oil climbed 1.98% to $79.81 amid expectations of the OPEC+ extending production curbs.

The United States Oil Fund, LP USO ended Friday’s session up 2.18% at $74.96, according to Benzinga Pro data.

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