Oil prices touched multi-month highs on Monday on expectations OPEC and allied producers may cap output at current levels in February and on hopes that vaccines may curb the spread of the novel coronavirus and drive an economic rebound.
As prices rose in line with broader financial markets, Brent crude futures reached $53.33 a barrel, the highest since March 2020. US West Texas Intermediate (WTI) crude touched $49.83 a barrel, the highest since February 2020.
By 1120 GMT, March Brent crude futures were at $52.52 a barrel, up $0.72, or 1.4%, and February WTI crude futures rose $0.42, or 0.9%, to $48.94 a barrel.
“Price action today (Monday) suggests that the market is assuming that OPEC+ keeps the level of cuts unchanged for the upcoming month,” said ING commodities strategist Warren Patterson.
Organisation of the Petroleum Exporting Countries (OPEC) and allies, a group known as OPEC+, is meeting on Monday. Most OPEC+ officials voiced opposition to increasing oil output from February when they met on Sunday, three OPEC+ sources told Reuters on Monday.
In December, OPEC+ decided to increase production by 0.5 million barrels per day (bpd) from January as part of a 2 million bpd gradual rise this year, but some members have questioned the need to release more oil because of an upsurge in the Covid-19 pandemic.
“The start of the new year is presenting challenges to the OPEC+ group, as the balance of risks to oil demand recovery has changed,” BNP Paribas analyst Harry Tchilinguirian said.
Kuwait’s oil minister said that he expected a gradual recovery in oil demand, particularly in the second half of 2021, as many countries start to distribute coronavirus vaccines.
Britain began vaccinating its population with the Covid-19 shot developed by Oxford University and AstraZeneca on Monday.
Tensions in the Middle East also supported oil prices after an “interaction” between Iranian authorities and a merchant vessel in the Strait of Hormuz led the ship to alter its course and proceed into Iranian waters.
Saudi Arabia-owned Al Arabiya TV said a South Korean-flagged tanker carrying chemicals had been seized by Iran.
Oil also drew strength from a weaker dollar and strong manufacturing activities in Asia.
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