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Oil prices touched multi-month highs on Monday on expectations OPEC and allied producers may cap output at current levels in February and on hopes that coronavirus vaccines may help curb the spread of the virus and drive a strong economic rebound in the new year.
Prices rose in line with broader financial markets with Brent crude futures reaching $53.33 a barrel, the highest since March 2020. U.S. West Texas Intermediate (WTI) crude touched $49.83 a barrel, the highest since February 2020.
March Brent crude futures were at $52.41 a barrel, up 61 cents, or 1.2%, by 0944 GMT and February WTI crude futures rose 35 cents, or 0.7%, to $48.87 a barrel.
“Price action today suggests that the market is assuming that OPEC+ keeps the level of cuts unchanged for the upcoming month,” said ING commodities strategist Warren Patterson.
OPEC and allies, a group known as OPEC+, will meet on Monday. Most OPEC+ experts voiced opposition to increasing oil output from February when they met on Sunday, three OPEC+ sources told Reuters on Monday.
In December, OPEC+ decided to increase production by 0.5 million barrels per day (bpd) from January as part of a 2 million bpd gradual rise this year but some members have questioned the need for a further boost due to spreading coronavirus infections.
“The start of the new year is presenting challenges to the OPEC+ group, as the balance of risks to oil demand recovery has changed,” BNP Paribas analyst Harry Tchilinguirian said.
“The OPEC+ producer group may have to re-schedule and delay further tapering of voluntary supply cuts in view of latest COVID developments,” he added.
Mohammad Barkindo, secretary general of OPEC, said on Sunday that the group saw plenty of downside demand risks in the first half of 2021.
Kuwait’s oil minister also said on Monday that he expected a gradual recovery in oil demand, particularly in the second half of 2021, as many countries around the world start to distribute coronavirus vaccines.
Britain began vaccinating its population with the COVID-19 shot developed by Oxford University and AstraZeneca on Monday.
Weaker dollar and strong manufacturing activities in Asia also supported oil prices.