Crude higher as market focuses on tightening fundamentals, OPEC+'s next move

London — Crude futures rose during European morning trading Feb. 24, as the market switched focus from a US inventory build and refinery outages to resilient longer-term fundamentals, inflationary pressure and a vaccine-led demand recovery.

At 1205 GMT, ICE April Brent crude futures were up 73 cents/b at $66.13/b, while the NYMEX April light sweet crude contract was 69 cents/b higher at $62.36/b.

The market was buoyed by stronger fundamentals that could absorb an expected reduction in voluntary cuts from OPEC+ at their next meeting on March 4.

"Should OPEC+ make a U-turn on voluntary cuts, there is enough tightness and pent demand to cover it. Renewed lockdowns haven't had as big of a drag on demand as in March as people and industry have adapted. Vaccine roll outs in the US and UK have been pretty good and other countries should soon follow so you have to factor in a demand recovery in the second half of the year," Global Risk Management's trader Alex Black said.

"There might be a pullback from OPEC+ supply increases but they cannot increase supply massively. Many producing countries in the Middle East require prices around these levels and we also don't know how quickly idled supply could be turned back online. Higher prices are here to stay," Black added.

Inflationary pressures from recovering demand, a weak dollar and US government stimulus were also buoying prices, sources said.

There was debate in the market on the impact of the production shut-ins in Texas, as conflicting information on the expected return of refineries emerged. Some sources said the impact would be felt more on the product side due to the refinery delays which could lead to stock draws coinciding with rising demand as vaccines roll out and lockdowns ease, ultimately increasing throughput demand.

Crude futures had fallen overnight after US crude inventory jumped more than 1 million barrels in the week ended Feb. 19, data from the API released late Feb. 23 showed. This was against analysts' expectations of a 5.19 million barrels draw but the bullish longer-term had regained the focus, sources said.

Investors were eying more definitive numbers from the US Energy Information Administration, due later Feb. 24, for fresh pricing cues.