Oil Prices Soar Over $1 as OPEC+ Holds Steady, Russian Energy Infrastructure Under Attack

Oil prices rose over $1 per barrel on Thursday, rounding off the month higher due to OPEC+’s production curbs, continuous attacks on Russia’s energy infrastructure, and a declining U.S. rig count, which tightens oil supply.

Brent crude futures for May closed at $87.48 a barrel, the highest since October 27, after rising $1.39, or 1.6%. The more actively traded June contract finished at $87 per barrel, up $1.58, while the May contract expires on Thursday.

US West Texas Intermediate (WTI) oil futures for May delivery finished at $83.17 a barrel, up $1.82 or 2.2%.

Brent jumped 2.4% this week, while WTI gained almost 3.2%. Both benchmarks finished higher for the third consecutive month.

Last week, U.S. crude oil and gasoline stocks unexpectedly increased due to increased imports and weak demand, putting pressure on oil prices.

However, the increase in crude stockpiles was smaller than the American Petroleum Institute predicted, and analysts observed that the increase was lower than expected for the season.

“We… expect U.S. inventories to rise less than normal, reflecting a slight deficit in the global oil market,” SEB analyst Bjarne Schieldrop said. “This will likely hand support to the Brent crude oil price going forward.”

Prices were also bolstered by higher refinery utilization rates in the United States, which increased by 0.9 percentage points last week.

According to energy services firm Baker Hughes, the oil and gas rig count, which is an early predictor of future output, declined by three to 621 in the week ending March 28.

The U.S. economy expanded faster than expected in the fourth quarter. The Commerce Department’s Bureau of Economic Analysis stated that gross domestic product expanded at a 3.4% annualized rate, up from the previously reported 3.2% pace.

“The stock market’s strength suggests strong forward earnings, which, in turn, point to a surprisingly strong US economy conducive to higher-than-expected energy product demand,” said Jim Ritterbusch of energy consultant Ritterbusch and Associates.

On Wednesday, a Fed governor stated that inflation data supports holding off on decreasing short-term interest rates. However, he did not rule out further rate cuts later this year.

“The market is converging on a June start to cuts for both the Fed and the European Central Bank,” JPMorgan analysts wrote in a report. Low-interest rates often boost oil demand.

Investors will seek clues from the Organization of Petroleum Exporting Countries (OPEC) Joint Monitoring Ministerial Committee, which meets next week.

Increased geopolitical risk has fuelled concerns about potential supply disruptions, but OPEC+ is unlikely to adjust its oil output policy until a full ministerial meeting in June.

According to Again Capital LLC partner John Kilduff, Ukraine’s attacks on Russian energy infrastructure have also bolstered optimism about global crude supply tightening, which has helped to underpin oil prices.

“It’s a prime target, and they appear to have not heeded the ask by the Biden administration to not attack Russian energy infrastructure,” Kilduff said in a statement.

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