The black liquid maintains its bullish posture today in the Asian session. Oil’s current market prices are at a level not seen in three years and a major catalyst to this multi-level highs was an OPEC+ decision to keep a limit on crude supplies as demand raises.

Yesterday, the Organization of Petroleum Exporting Countries and its allies (OPEC+) decided to stick to its original pact to gradually increase oil production. Oil bulls have taken this news with much encouragement as they sent the brent oil, the global benchmark for oil over the $81 trading zone.

The OPEC+ maintaining its initial agreements means that the group will boost output by 400,000 bpd a month until at least April 2022 to phase out 5.8 million BPD of existing production cuts.

The OPEC+ sticking to the pact would mean that they ignored calls from top oil importers like the United States and India, who have solicited for the group to increase output as a result of rising gas prices.

The oil price rally has caused an increase in gas prices, which have spiked by 300% and have come to trade close to an equivalent of $200 per barrel due to supply shortages and low production of other fuels.

What they are Saying

Russian Deputy Prime Minister Alexander Novak said during a speech that the decision, “will allow us to continue to normalize the market situation.” He further said that after the talks he believed the market is now balanced.

Capital Economics stated in a note that, “We expect a gradual normalization in demand growth and a rebound in supply will start to weigh on oil prices from the fourth quarter. This year, growth in demand has outpaced supply, helping prices to hit multi-year highs, but we expect this dynamic to reverse as OPEC+ ramps up production.”

Barclays analyst Amarpreet Singh said in a note that the OPEC+ decision reflects “a lack of urgency within the group to ramp up output on the expected surplus in 2022 and limited capacity with key producers.” He further explained that the jump in crude prices overnight “looks a bit outsized given the ministers just reaffirmed the decision announced in July but it shows how tight the market is.”

Bottomline

Investors now await U.S. crude oil supply data from the American Petroleum Institute, due later in the day to further gauge how severe the oil shortage could be.

The Brent crude, the global benchmark for oil is up 0.20%, currently trading at $81.42 a barrel, having risen 2.5% yesterday. U.S. benchmark, the West Texas Intermediate (WTI) oil is up 0.06%, currently trading at $77.67, after gaining 2.3% yesterday.