Oil prices stable as Opec+ sticks to policy ahead of Fed meeting

Oil prices remained relatively stable after Opec and its allies stuck to their output policy while the market awaits a US interest rate decision and data on US crude and fuel stockpiles later on Wednesday.

Brent crude futures were down 14 cents, or 0.1%, at $85.47 a barrel by 1419 GMT. West Texas Intermediate (WTI) US crude futures rose 13 cents, or 0.2%, to $79.09.

Ministers from the Opec+ producer group comprising the Organization of the Petroleum Exporting Countries (Opec) and allies including Russia kept their output policy unchanged at a virtual meeting on Wednesday.

Opec’s oil output fell in January, as Iraqi exports dropped and Nigerian output did not recover, with the 10 Opec members pumping 920,000 barrels per day (bpd) below Opec+ targeted volumes, a survey found.

The shortfall was bigger than the 780,000 bpd deficit in December.

Elsewhere, Russia’s Deputy Prime Minister said he expected oil demand to rise on the back of Chinese economic activity.

Tamer US rate hike expectations helped to lower the dollar index , which supported oil prices, said PVM analyst Stephen Brennock. A weaker US currency makes dollar-priced oil cheaper for buyers holding other currencies.

The US Federal Reserve is expected to deliver its interest rate decision at 1900 GMT. Data from the American Petroleum Institute shows US crude stocks rose about 6.3 million barrels, more than expected, in the week ended Jan 27, market sources said. Government stockpile data is due at 1530 GMT.

“Commercial storage in North America is ample,” said Norbert Ruecker, economist at the bank Julius Baer. “The improved market mood has lifted prices of late, but this support should remain temporary. We see lower prices longer term, in line with the futures market’s expectations.”

WTI is trading in contango, which means frontmonth delivery contracts are trading higher than later deliveries, indicating current oversupply. Brent is in a shallow backwardation, the opposite market structure.

Meanwhile, Oman oil price yesterday reached $83.55 per barrel, recording an increase of $3.15 per barrel compared to Tuesday’s price of $79.91 per barrel.

The average price of Oman oil (February 2023 delivery) has stabilised at $77.43 per barrel, registering a decline of $8.72 per barrel than January 2023 delivery. — Reuters