NEW YORK: Oil prices climbed more than 4% on Tuesday as OPEC+ was nearing a compromise to hold crude production steady in February, while tension simmered following Iran’s seizure of a South Korean vessel.
Brent crude futures rose $2.15, or 4.2%, to $53.24 a barrel by 11:10 a.m. EST (1610 GMT). U.S. West Texas Intermediate crude rose $2.27, or 4.8%, to $49.89 a barrel.
During talks with the Organization of the Petroleum Exporting Countries and others including Russia, Saudi Arabia offered to make voluntary cuts to its oil production in February, two OPEC+ sources said.
“If the Saudis are going to shoulder the load and take oil off the market, that changes the dynamic quite a bit,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “It looks like the Saudis are taking the role as the global swing producer.”
The producer group was setting aside a possible output increase on fears that the market could be flooded with crude if new coronavirus lockdowns further depress demand, four OPEC+ sources told Reuters on Tuesday.
Both contracts fell more than 1% on Monday after OPEC+ failed to agree on a February output target.
An OPEC document dated Jan. 4 showed the group was studying a range of scenarios including more production, no change or cutting output by 500,000 barrels per day (bpd) in February.
“It is no secret that the bullish kick which crude markets have received through much of the last quarter (crude rose almost 30% in Q4 2020) and again this morning is supported by a particularly hands-on approach from OPEC+ to tighten crude markets and bring inventories lower through 2021,” JBC Energy analysts said in a note.
Tensions around OPEC member Iran’s seizure of a South Korean vessel continued, as Iran said the Asian country owed it $7 billion.
Still, bearish elements loom for the market. England began a new lockdown on Monday as its coronavirus cases surged. Coronavirus lockdowns have weighed on fuel demand since early last year.
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