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Oil futures gain ground Monday, buoyed in part by a survey indicating crude output by the Organization of the Petroleum Exporting Countries rose less than expected in January.
West Texas Intermediated crude for March delivery CL.1, +0.42% CLH21, +0.42% rose 36 cents, or 0.7%, to $52.56 a barrel on the New York Mercantile Exchange. April Brent crude BRN00, +0.74% BRNJ21, +0.74%, the global benchmark, was up 55 cents, or 1%, at $55.59 a barrel on ICE Futures Europe.
A Reuters survey found that OPEC members pumped 25.75 million barrels a day of crude in January, up 160,000 barrels a day from December.
“The production growth was thus significantly smaller than expected,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
The terms of the agreement reached at the meeting of OPEC members and its allies, or OPEC+, in December gave OPEC room to boost output by up to 300,000 barrels a day. Fritsch, noted, however, that the smaller expansion of supply wasn’t due to “voluntary reticence” on the part of members, but due to involuntary production outages in Nigeria.
Strong backwardation — when nearby prices trade above longer dated futures — remains a bullish feature of the market, said Michael Tran, commodity strategist at RBC Capital Markets, in a note.
The strong expiration of the March Brent contract last week at an 84 cent premium to the April contract was particularly noteworthy, he said, since month-end expiration “is when the financial futures and physical crude prices are reconciled for physical delivery for the stated contract month.”
“Simply put, the strong finish is indicative of a physical market that is stronger than the financial market had been pricing,” he said.
