Oil advanced in Asian trading as investors assessed the potential supply response from the US to a gradual hike in production from OPEC+, which may include the release of strategic reserves.
Futures in New York rose near $80 a barrel after losing more than 6 percent over the past three sessions. After a brief meeting, the alliance agreed to boost output by 400,000 barrels a day in December, maintaining its modest pace of monthly increases. The White House is considering a range of tools to deal with prices, a National Security Council spokesperson said after the OPEC+ decision.
Price volatility is expected to rise in the coming weeks after OPEC+ shunned the US request for more crude, according to Goldman Sachs Group Inc., adding that the market remained under-supplied. UBS Group AG, meanwhile, reiterated its forecast for global Brent oil to reach $90 a barrel over the coming months.
President Joe Biden has led calls for OPEC+ to add more barrels to tame high oil prices, which he blames for inflationary pressure. The US was seeking an increase of as much as double the agreed amount and has been among key consumers that previously raised the prospect of tapping their own strategic reserves if the alliance didn’t heed the call to boost supply.
“OPEC+ holds all the cards and if the SPR supplies do not get tapped, much higher prices will ensue, said John Kilduff, founding partner at Again Capital LLC. “With the peak demand season looming, we are in the crunch period.
Oil has rallied to multiyear highs as major economies including the US and China recovered from the pandemic, with BP Plc estimating global demand has rebounded above the pre-virus level of 100 million barrels a day. OPEC+ has cited risks from ongoing outbreaks for its cautious approach.
A global supply crunch due to coal and natural gas shortages has exacerbated the tightness in the oil market, while some OPEC members failing to reach their output targets has put additional pressure on crude supply.
“Oil is not the problem, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said after the OPEC+ meeting on Thursday, citing natural gas shortages. “The problem is the energy complex is going through havoc and hell.