By Barani Krishnan
Investing.com — U.S. crude prices hit a decade high while global benchmark Brent scaled mid-2014 peaks after OPEC+ did little Wednesday to offset the energy supply crisis heightened by Western sanctions on major oil producer Russia for the war in Ukraine.
U.S. crude’s West Texas Intermediate crude, or WTI, benchmark settled up $7.19, or 7%, at $110.60 a barrel.on its front month. WTI hit $112.47 earlier in the session, its highest since May 2011.
The most-actively traded contract on global crude benchmark Brent meanwhile, settled up $7.96, or 7.6%, at $112.93 a barrel. Its intraday peak of $113.93 was the highest since June 2014.
“And at a time when the market is already extremely tight … OPEC+ still seems unwilling to acknowledge” that, Craig Erlam, analyst at online trading platform OANDA.
OPEC+, chaired by Saudi Arabia with the assistance of Russia, authorized the 23 oil producing countries in the alliance to increase output by a total of 400,000 barrels per day in April.
It’s a quantum the group had stuck to for the past nine months. But it’s also an aspiration it has barely met, either due to production constraints at under-invested oil wells or a deliberate miss of the target — especially on the part of the Saudis — to ensure the oil rally doesn’t get short-circuited in any way. WTI has risen 45% this year alone while Brent has gained 43%.
““The Saudis have it within their power to snuff out some of this rally that we’re seeing for sure,” John Kilduff, partner at New York energy hedge Again Capital, said in comments carried by CNBC. “They could easily put another 1 million to 2 million barrels per day of oil on the market with almost the flick of a switch.”
Russian Deputy Prime Minister Alexander Novak, who sat in on Wednesday’s virtual meeting of OPEC+, called the oil market “balanced” and hoped that “oil market volatility would ease” going forth. Balanced in OPEC+ speak typically means an undersupplied market. When the alliance expresses hope for reduced market volatility, it basically means it wants prices to go one way only — up.
Adding to Wednesday’s market fervor was data from the U.S. Energy Information Administration showing an across-the-board drop in crude and fuel stockpiles.
Crude stockpiles slid by 2.6 million barrels during the week to Feb. 25 after a build of 4.5 million barrels the previous week.
Of particular concern were inventory levels at the Cushing, Oklahoma delivery point for WTI which showed a critically-low balance of 22.8 million barrels versus the period week’s level of 23.8 million.
U.S. crude stockpiles have moved between declines and builds over the past month, responding to economic trends pressured by shifts in the coronavirus pandemic and inflation growing at its fastest pace in 40 years.
Stockpiles of gasoline dipped by 468,000 barrels last week, adding to the previous decline of 582,000 barrels. Automobile fuel gasoline, also known as petrol outside the United States, is America’s most-consumed oil product. Prior to the past four weeks, gasoline saw builds of around 37,000 barrels in the preceding eight weeks, indicating weaker demand.
Distillate inventories slid by 574,000 barrels, on top of the previous week’s decline of 1.6 million barrels. Distillates, which are refined into diesel for trucks, buses, trains and ships as well as fuel for jets, have been the strongest growth component of the US oil complex for months, seeing non-stop inventory declines since mid-January.