Oil Reaches Multi-Year Highs as OPEC+ Maintains Output Plan, Reported by Reuters

By Nia Williams

Oil prices surged on Tuesday, reaching their highest levels since 2014. Brent futures climbed to a three-year peak following the OPEC+ group of producers’ decision to maintain its planned output increase rather than further raising it.

On Monday, OPEC+ confirmed its commitment to its July agreement aimed at boosting output by 400,000 barrels per day (bpd) each month until at least April 2022, effectively phasing out 5.8 million bpd of existing production cuts.

In trading, U.S. West Texas Intermediate (WTI) oil closed up $1.31, or 1.7%, at $78.93 a barrel. Earlier in the session, it surged by more than 2% to a high of $79.48, marking the highest level in nearly seven years. Meanwhile, Brent settled up $1.30, or 1.6%, at $82.56, reaching a three-year high of $83.13 earlier in the day.

Both oil contracts extended the gains achieved on Monday when each rose by over 2%.

"The market is realizing we are going to be undersupplied for the next couple of months, and OPEC seems to be content with that situation," said Phil Flynn, an analyst at Price Futures Group in Chicago.

Oil prices have increased more than 50% this year, adding to inflationary concerns for crude-consuming nations, including the United States and India, which worry this could impede recovery from the COVID-19 pandemic.

Late last month, the OPEC+ Joint Technical Committee (JTC) projected a supply deficit of 1.1 million bpd for this year, which could transition to a surplus of 1.4 million bpd next year.

Despite pressure for an output increase, OPEC+ expressed concerns about a potential fourth global wave of COVID-19 infections impacting demand recovery.

Rising global oil prices could motivate some power generators to shift from gas to oil, likely providing ongoing support for crude prices, although a short-term pullback may occur. Gary Cunningham, director of market research at Tradition Energy, commented, "I think there will be some profit-taking, but we are heading into winter with exceptionally high natural gas prices." He anticipates Brent will find support around $80, with WTI in the mid-$70s range.

Investors are expected to turn their attention to Wednesday’s crude inventory data from the U.S. Energy Information Administration for further guidance. Preliminary polls indicate a likely decline in U.S. crude oil and distillate inventories in the past week.