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U.S. Oil at Decade High as OPEC+ Ignores Supply Crisis Heightened by War  -Breaking


© Reuters.

By Barani Krishnan  — prices hit a decade high while global benchmark scaled mid-2014 peaks after OPEC+ did little Wednesday to offset the energy supply crisis heightened by Western sanctions on major oil producer Russia for the war in Ukraine.

​​U.S. crude’s , or WTI, benchmark was up $7.07, or 6.8%, at $110.48 a barrel on its front month by 2:21 PM ET (19:21 GMT). WTI reached $112.47 in the earlier session, marking its highest level since May 2011.

In the meantime, the most traded global crude benchmark contract rose $7.44 (or 7.1%) to $112.41/barrel. This was its intraday highest level since June 2014.

“And at a time when the market is already extremely tight … OPEC+ still seems unwilling to acknowledge” that, Craig Erlam, analyst at online trading platform OANDA. 

OPEC+ is a group of 23 oil-producing countries that was presided over by Saudi Arabia and Russia. They were authorized to produce an additional 400,000 barrels of oil per day for April. 

It’s a quantum the group had stuck to for the past nine months. But it’s also an aspiration it has barely met, either due to production constraints at under-invested oil wells or a deliberate miss of the target —  especially on the part of the Saudis — to ensure the oil rally doesn’t get short-circuited in any way. Brent is up 43%, while WTI rose 45%.

““The Saudis have it within their power to snuff out some of this rally that we’re seeing for sure,” John Kilduff, partner at New York energy hedge Again Capital, said in comments carried by CNBC. “They could easily put another 1 million to 2 million barrels per day of oil on the market with almost the flick of a switch.”

Russian Deputy Prime Minister Alexander Novak, who sat in on Wednesday’s virtual meeting of OPEC+, called the oil market “balanced” and hoped that “oil market volatility would ease” going forth. OPEC+ usually refers to a market that is undersupplied as balanced. When the alliance expresses hope for reduced market volatility, it basically means it wants prices to go one way only — up.

Adding to Wednesday’s market fervor was data from the U.S. Energy Information Administration showing an across-the-board drop in crude and fuel stockpiles.

After a week of growth, the weekly drop in oil production was 2.6 million barrels. 

Of particular concern were inventory levels at the Cushing, Oklahoma delivery point for WTI which showed a critically-low balance of 22.8 million barrels versus the period week’s level of 23.8 million.

U.S. crude stocks have been fluctuating between builds and declines over the past month in response to shifting economic trends caused by changes in the coronavirus epidemic and rising inflation.

Last week’s drop in crude oil prices was 468,000 barrels. This is on top of the previous fall of 582,000. Automobile fuel gasoline, also known as petrol outside the United States, is America’s most-consumed oil product. In the eight previous weeks, gasoline had a buildup of 37,000 barrels, which indicates weaker demand.

slid by 574,000 barrels, on top of the previous week’s decline of 1.6 million barrels. For months distillates have been the largest component of US oil’s expansion, with steady inventory drops since January.