New York — Oil futures moved sharply higher March 3 as the market increasingly priced in a modest quota increase expected at the March 4 OPEC+ meeting after a key advisory committee issued no recommendation on April output levels.
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NYMEX April WTI settled up $1.53 at $61.28/b, and ICE May Brent climbed $1.37 to $64.07/b.
The Joint Ministerial Monitoring Committee, co-chaired by Saudi Arabia and Russia, wrapped up its March 3 session quickly with no substantive discussion on production policy, sources said.
Delegates said OPEC kingpin Saudi Arabia continued to urge the producer coalition to be conservative and limit any rise in quotas, to the frustration of other members who were eager to pump and sell more crude to take advantage of the oil market's bull run.
Several OPEC+ members, chiefly Russia, are expected to push for a loosening of quotas.
Under the current agreement, OPEC and nine allies are cutting a collective 7.1 million b/d of production — roughly 7% of global pre-pandemic demand — which can be eased by up to 500,000 b/d each month.
S&P Global Platts Analytics said in a recent note that solid OPEC+ quota compliance may be enough to convince Saudi Arabia to continue with at least a portion of its extra 1 million b/d cut to keep propping up the market. An OPEC+ technical report showed the alliance achieved 103% compliance on its pledged cuts in January.
Many analysts said the market can absorb a combined 1.5 million b/d OPEC+ production rise without causing oil prices to backslide, as the global economy appears to be rebounding from the pandemic, while rival US producers remain focused more on profitability than output growth.
US gasoline inventories plunge
The oil price rally accelerated after US Energy Information Administration data showed US gasoline inventories plunged 13.62 million barrels to 243.47 million barrels during the week ended Feb. 26. It was the largest-ever one-week draw reported by EIA in records dating back to January 1992, and put inventories nearly 4% behind the five-year average.
NYMEX April RBOB settled 1.54 cents higher at $1.9518/gal and April ULSD climbed 2.76 cents to $1.8357/gal.
The product draws were due in large part to lowered production stemming from lingering refinery outages on the US Gulf Coast caused by severe winter weather earlier in February. Refinery net crude inputs averaged 9.9 million b/d last week, down 2.33 million b/d from the week prior and the lowest on record dating back to 1982.
While refineries are likely to reach pre-storm levels by mid-March, the steep draw sets the stage for a tighten supply picture just as seasonal demand begins to pick up. Furthermore, states have begun to loosen pandemic restrictions in the face of declining caseloads, adding further potential upside to demand outlooks.
New York Governor Andrew Cuomo on March 3 announced that his state would ease some restrictions on social gatherings later in March. Texas Governor Greg Abbott on March 2 issued an executive order rescinding previous pandemic capacity restrictions on businesses and ending a statewide mask mandate.
The gasoline draw offered a bullish counterpoint to a massive build in US crude stocks. Inventories climbed 21.56 million barrels to 484.61 million barrels in the largest-ever one-week build reported by EIA.
Notably, nearly 97% of the crude build was realized on the US Gulf Coast, while inventories at the NYMEX delivery point of Cushing, Oklahoma, climbed just 490,000 barrels to 48.31 million barrels.