The U.S. oil benchmark, the West Texas Intermediate (WTI) is on the verge of breaking through the $80 resistance zone as demand for oil keep increasing and supply tightening.
Both benchmarks have climbed for a fourth day on the supply concerns, particularly after the Organization of the Petroleum Exporting Countries and its allies (OPEC+), decided on Monday to stay with their planned output increase rather than boosting it further.
U.S. West Texas Intermediate (WTI) oil is currently trading $79.19 a barrel, up 0.14% for the day, the highest since November 2014. Brent crude is also trading $82.82 a barrel, up 0.13% for the day, trading near last session’s three-year high.
On Monday, the OPEC+ agreed to stick to its pact to boost output by 400,000 barrels per day (bpd) each month until at least April 2022, phasing out 5.8 million bpd of existing production cuts.
Late last month, the OPEC+ Joint Technical Committee (JTC) said it expected a 1.1 million bpd supply deficit this year, which could turn into a 1.4 million bpd surplus next year.
Oil prices have gained over 50% this year, adding to inflationary pressures which nations like the United States and India have expressed concerns about stating that it could derail recovery from the COVID-19 pandemic.
Despite pressure to ramp up output, OPEC+ was concerned that a fourth global wave of COVID-19 infections could hit the demand recovery and hence encouraged the decision to stick to its original pact.
ANZ analysts said in a note that, “Crude oil extended gains as investors fret about tightness in the market as the energy crisis hikes demand. The (OPEC+) increase was well below what the market was expecting, considering the energy crunch across the globe. Not surprisingly, there is speculation that OPEC will be forced to move before the next scheduled meeting if demand continues to surge.”
However, inventory data from the United States, the world’s biggest oil consumer, revealed some signs of slowing fuel demand. The American Petroleum Institute reported U.S. oil inventories rose by 951,000 barrels last week. Gasoline and distillate fuel inventories also climbed, according to data from, API, American Petroleum Institute.