Oil prices experienced a significant surge of over $1 per barrel following reports that OPEC+ is contemplating extending voluntary oil output cuts into the second quarter to provide additional support to the market.
Brent crude futures increased by $1.12, or 1.4%, to reach $83.65 a barrel, while U.S. West Texas Intermediate crude futures (WTI) rose by $1.29, or 1.7%, reaching $78.87.
OPEC+ agreed in November to implement voluntary cuts totaling around 2.2 million barrels per day (bpd) for the first quarter of the year, with Saudi Arabia leading by extending its own voluntary cut.
Sources have indicated that the producer group is considering maintaining these additional cuts until the end of the year, aiming for Brent crude prices to reach the mid-$80s, potentially around $85 per barrel.
Geopolitical tensions also contributed to the rise in prices, as Israel, Hamas, and Qatari mediators expressed caution about progress towards a ceasefire in Gaza. Houthi spokespersons from Yemen stated that their operations in the Red Sea would cease only when Israeli aggression against Gaza ends.
Market expectations regarding U.S. crude inventories showed an anticipated rise of approximately 2.7 million barrels last week, with expectations of decreases in distillates and gasoline stockpiles.
Additionally, the 3-2-1 U.S. refinery crack spread, a measure of refining margins, reached its highest level in over five months, indicating increased profitability for refineries due to robust consumer demand for petroleum products.
Furthermore, the Russian government announced a six-month ban on gasoline exports starting March 1 to address rising domestic demand and facilitate refinery maintenance.
Despite recent fluctuations, global crude oil markets are anticipated to remain relatively stable around $80 per barrel throughout the year. Russel Hardy, CEO of oil and gas trader Vitol, mentioned at an Energy Institute conference that global oil demand is expected to peak in the early 2030s.
Monday’s settlement saw both oil benchmarks increasing by more than 1%, reversing declines of 2-3% observed in the previous week as markets adjusted expectations regarding the timing of potential interest rate cuts.