Oil rises as OPEC+ mulls extending output cuts

HOUSTON — Oil prices rose more than $1 a barrel on Tuesday as sources said OPEC+ is considering extending voluntary oil output cuts into the second quarter to provide additional support.

Brent crude futures rose $1.12 or 1.4% to $83.65 a barrel, while US West Texas Intermediate (WTI) crude futures were up $1.29 or 1.7% at $78.87.

The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, agreed in November to voluntary cuts totaling about 2.2 million barrels per day for the first quarter this year, led by Saudi Arabia rolling over its own voluntary cut.

The producer group could keep the additional cuts in place until the end of the year, two of the sources told Reuters.

“We are going to see some tight supplies down the road,” said Dennis Kissler, senior vice-president of trading at BOK Financial.

“OPEC is looking for mid-$80s, may be around $85 a barrel on Brent. If we stay below that, they will curtail production all the way to the year end,” Mr. Kissler added.

Also supporting prices on the supply side, Israel and Hamas, as well as Qatari mediators, all sounded notes of caution about progress towards a truce in Gaza, after US President Joseph R. Biden said he believed a ceasefire could be reached in under a week to halt the war for Ramadan.

Yemen’s Houthi spokesperson said the group’s operations in the Red Sea would stop only when

Israeli “aggression” against Gaza ends. Houthi missile and drone attacks on international shipping have driven up the cost of transporting energy products and contributed to a tighter market.

In the US, crude inventories were expected to have risen about 2.7 million barrels last week, while distillates and gasoline stockpiles were seen falling, a Reuters poll showed.

Meanwhile, the 3-2-1 US refinery crack spread, a proxy for refining margins, rose to their highest in more than five months. The surge suggests increased profitability for refineries amid robust consumer demand for petroleum products.

Both oil benchmarks had settled more than 1% higher on Monday after declines of 2-3% over the previous week as markets factored in a greater likelihood that cuts to interest rates might take longer to come than previously expected. —