Tight inventory: Oil gains 5% as OPEC+ extends cuts into April

Oil rallied more than 5 percent on Thursday to the highest in over a year, after the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to keep production unchanged into April.

Global benchmark Brent crude futures were up $3.38 or 5.28 percent at $67.45 a barrel by 12:43 pm ET (17:43 GMT), after rising to $67.75, a peak since January 2020.

United States West Texas Intermediate (WTI) crude rose about $3.3 or 5.4 percent at $64.58, having also scaled its highest in more than a year, at $64.86.

“OPEC surprised us by rolling over the cuts … The message OPEC is sending [the] market is that they’re quite willing to see oil prices run hot and ultimately, go a long way in reducing the inventory overhang built last year because of COVID-19,” said Bart Melek, head of commodity strategies at TD Securities.

Saudi Arabian Energy Minister Prince Abdulaziz bin Salman confirmed that the top crude exporter was extending its voluntary one million barrel per day production cut and would in coming months choose when to gradually phase out this reduction.

“There is one thorn to the bullish cocktail though and very few are surprised. Russia wants to boost output,” head of oil markets at Rystad Energy, Bjornar Tonhaugen said in a note.

Russia and Kazakhstan have been allowed modest production increases under the deal.

“Russia aside, the biggest winner of an OPEC+ rollover is the US. With such price levels, which are now boosted even more after the news of a possible rollover consensus, the US can comfortably increase production, even from costly break-even projects,” Tonhaugen added.

In the United States, despite a record surge of more than 21 million barrels in crude oil stockpiles last week, gasoline stocks fell by the most in 30 years as refining plunged due to a winter-weather freeze in the oil-producing state of Texas.

Also propping up sentiment, Yemen’s Houthi forces said they had fired a missile at a Saudi Aramco facility in Saudi Arabia’s Jeddah.