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Crude pushes to 1-year highs as OPEC+ cuts tighten supply outlooks

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Brent approaches resistance at $60/b

New York — Crude oil futures pushed to fresh one-year highs Feb. 4 as the market eyed a tightening global supply picture.

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NYMEX March WTI settled 54 cents higher at $56.23/b, and ICE April Brent climbed 38 cents to $58.84/b.

Oil prices continued to ride a wave of optimism following the Feb. 3 OPEC+ Joint Ministerial Monitoring Committee meeting that highlighted the success of production cuts in lowering global oil inventories and made no recommendations for any changes to the alliance's production cut accord.

The overnight rally stumbled in midmorning US trading amid a rising US dollar, but prices were able to shrug off those headwinds amid tightened supply outlooks. The ICE US Dollar Index climbed above 91.5 in afternoon trading, up from 91.15 on Feb. 3 and on pace for the highest close since late-November.

"OPEC restraint, as well as struggling US oil production, is causing global inventories to tighten," Price Futures Group analyst Phil Flynn said in a note. "So much so that the world is headed towards a substantial supply deficit in the next year as we continue the oil demand vaccine-related recovery pace."

The oil rally may be running out of steam as prices reach levels that would entice producers to ramp up output analysts said.

"The closer we shift towards $60/b [for Brent], one would have to assume it could be a potential faster game-changer and OPEC+ production cut unwinder. Not to mention [that] US shale will be eager to step on the production accelerators," Stephen Innes, chief global markets strategist at Axi, said in a note Feb. 4.

NYMEX March ULSD settled down 1 cent at $1.7005/gal, while March RBOB declined 38 points to $1.6448/gal.

"Crude continues to rise on strong momentum from falling stockpiles and COVID vaccine progress," OANDA senior market analyst Edward Moya said in a note. "It's been quiet on the energy front so far, which is allowing energy traders to focus on the improving supply and demand fundamentals."

The ICE New York Harbor RBOB crack versus Brent fell back to $14.44/b in afternoon trading, down from a Feb. 3 close of $14.73/b.