Crude oil futures are poised for a second consecutive monthly advance as OPEC+ is anticipated to prolong its production cuts at least through the second quarter.
The West Texas Intermediate contract for April edged up by 10 cents, or 0.13%, to $78.64 per barrel. Meanwhile, the April Brent contract, set to expire on Thursday, experienced a marginal decrease of 2 cents, or 0.02%, settling at $83.66 per barrel.
Both the U.S. and Brent benchmarks have recorded approximately a 6% increase month-to-date, with near-term contracts trading at a premium compared to those further out. Such a premium, indicating a tightening oil market, is characteristic of immediate delivery surpassing later delivery.
According to three sources briefed by Reuters on Wednesday, OPEC+ is contemplating the extension of production cuts at least into the second quarter. Two of the sources suggested the possibility of maintaining these cuts throughout the year.
In November, OPEC+ reached an agreement to slash production by 2.2 million barrels per day in the first quarter of 2024. This decision came amidst robust crude output from the U.S., Canada, Guyana, and Brazil, which exerted downward pressure on oil prices toward the end of last year.
Additionally, escalating tensions in the Middle East, particularly along the Israel-Lebanon border and due to continued Houthi militant attacks on Red Sea shipping, have contributed to price hikes.
Thus far, the conflict has not disrupted crude production in the region. However, analysts caution that the risk of a confrontation between Iran and the U.S. looms, potentially impacting the oil market significantly.
