Oil costs hit a multi-month excessive as OPEC + is predicted to restrict manufacturing

© Reuters. FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris

By Florence Tan

SINGAPORE (Reuters) – Oil prices hit a multi-month high on Monday as it was expected that OPEC and allied manufacturers could limit production to current levels in February as the coronavirus pandemic increases concerns about demand in the first half of the year.

Prices rose in line with broader financial markets, with futures hitting $ 53.17 a barrel, their highest level since March 2020. US West Texas Intermediate crude oil hit $ 49.71 a barrel, its highest level since February 2020.

Brent crude oil futures in March were at $ 52.94 a barrel, up $ 1.14, or 2.2%, to 0736 GMT, while WTI crude oil futures were up 98 cents, or 2%, in February $ 49.50 a barrel rose.

Virendra Chauhan, an analyst at Energy Aspects, said broader macro trends such as a weaker dollar and investors positioning themselves for an oil sector rebound this year could support oil prices.

“Perhaps there is a positive sentiment from OPEC + trying to cut supplies in the face of the virus that is rearing its ugly head in the West,” he added.

Mohammad Barkindo, general secretary of the Organization of Petroleum Exporting Countries (OPEC), said on Sunday that crude oil demand is expected to rise 5.9 million barrels per day (bpd) this year to 95.9 million bpd, but the group sees many drawbacks Demand risks in the first half of 2021.

“We are only starting after a year of deep investment cuts, huge job losses and the worst demand crunch ever,” he said.

Prices ended 2020 roughly 20% below the 2019 average and are still rebounding from the impact of global lockdowns that have lowered fuel demand, despite the world’s largest manufacturers agreeing record cuts in production.

OPEC and allied manufacturers, including Russia, a group known as OPEC +, decided last month to increase production by 500,000 barrels a day in January to anticipate a surge in demand, and agreed to meet every month to check production.

Analysts from Energy Aspects and RBC Capital said OPEC + is expected to maintain January production levels in February.

“We believe the grower community will forego any further production increases in February as COVID-19 cases continue to rise and vaccine rollout comes slower than expected,” said Helima Croft of RBC Capital.

In the United States, crude oil production remained under pressure due to weak prices and tepid demand, declining more than 2 million barrels per day (bpd) in October from 2020, a government report on Jan. 1 showed.

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