Picture: 123RF/PAVEL IGNATOV
Picture: 123RF/PAVEL IGNATOV

London — Oil prices touched multi-month highs on Monday on expectations that oil cartel Opec and allied producers, including Russia (Opec+), 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. US 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 61c, or 1.2%, by 9.44am, GMT and February WTI crude futures rose 35c, 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+, will meet later in the day. Most Opec+ experts voiced opposition to increasing oil output from February when they met on Sunday, three Opec+ sources said.

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 in 2021 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 Opec+, as the balance of risks to oil demand recovery has changed,” BNP Paribas analyst Harry Tchilinguirian said. “Opec+ may have to reschedule and delay further tapering of voluntary supply cuts in view of latest Covid-19 developments.” 

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 expects 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.

Reuters

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