Oil rose Wednesday, extending its march toward 2024, as the Organization of Petroleum Exporting Countries (OPEC) confirmed moderate output increases amid rising pressure from consuming countries to ramp up supplies more quickly.
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| Oil rises as OPEC maintain output increases (2022 Updated) |
- On February 2, OPEC resisted consumer-country pressure to increase output and confirmed modest increases of 400,000 barrels per day of crude oil.
- Due to supply constraints and concerns about a Russian invasion of Ukraine, oil prices have risen since they increased by 14% in January.
- The absence of spare capacity among OPEC members has impeded the achievement of agreed-upon output targets.
- The United States' oil stockpiles dropped more than expected last week, falling below their five-year average.
- Based on trade data and charts, oil prices are predicted to remain optimistic in the short to medium term.
West Texas Intermediate (WTI) crude increased by about 0.7 percent today, closing at $88.86 a barrel. Brent oil rose 31 cents to $89.47 in New York on Tuesday. The current advances come after a tumultuous month in which oil prices rose 14% in January due to supply issues and fears that Russia, the world's third-largest producer, may attack Ukraine.
OPEC+, a consortium of the world's top oil producers and exporters, affirmed monthly gains of 400,000 barrels per day (B/D) but warned that reduced investment in fossil fuels was contributing to rising prices.
Customers urge businesses to turn up the heat on production to satisfy increased demand as economies recover from the coronavirus outbreak.
OPEC is an oil cartel that strives to regulate the supply of oil in order to determine the price of oil on the global market, avoiding volatility that might harm the economies of both producing and purchasing nations.
Production is hampered by spare capacity.
OPEC countries' lack of spare capacity has complicated agreed-upon output objectives, making it harder for certain governments to reach production limits. Although Saudi Arabia might boost output, doing so could push up oil prices by eliminating the backstop to protect against a global supply disruption.
Meanwhile, according to a paper prepared for the cartel's meeting and reported by Reuters, global oil demand growth will stay steady this year at 4.2 million B/D, with demand expected to approach pre-pandemic levels in the second half of 2022.
"January has been a terrific month for oil prices, and $100 oil may not be far away," OANDA commodity analyst Ed Moya said in a note reported by S&P Global.
Oil Stockpiles Fall Unexpectedly
Oil prices rose further on Feb. 2 after the Energy Information Administration (EIA) reported a 1 million barrel decline in oil stocks last week, despite experts expecting stockpiles to rise by nearly that much.
Furthermore, refining capacity declined 1% from the previous week to 87 percent, above the 0.1 percent drop predicted by economists. Overall, US oil stockpiles are 415.1 million barrels, or about 9% less than their five-year average.
Crude oil stocks, commonly known as inventory, are unrefined petroleum reserves measured in barrels. Crude stocks are used by oil companies and governments to mitigate the effects of variations in supply and demand.
Bullish sentiment is expected to persist, according to the chart and trading data.
Technically, Brent crude oil has stabilized above a six-month trading range, suggesting that the positive feeling may persist in the short- to medium-term, despite the relative strength index (RSI) remaining in an overbought position.
Recent trade statistics also suggest that oil bulls are still in charge, with NYMEX crude net long holdings increasing in four of the previous six weeks to the week of Jan. 25.
Failure to break above the crucial $90 level, or a breach below the range's upper trendline, might result in a pullback down to the next critical level of support at $77.75.
