Oil prices gain after OPEC+ maintains output cuts

The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann/File photo

SINGAPORE  – Oil prices rose in early trade on Friday following a decision by OPEC+ to keep its oil output policy unchanged, clawing back some losses from the previous trading session triggered by unsubstantiated ceasefire reports between Israel and Hamas.

Brent crude futures rose 50 cents, or 0.6 percent, to $79.20 a barrel at 0155 GMT, while U.S. West Texas Intermediate crude futures gained 40 cents, or 0.5 percent, to $74.22 a barrel.

Both contracts settled more than 2 percent lower on Thursday due to the unverified ceasefire reports between Israel and Hamas. However, a Qatari official said there was no ceasefire. He said Hamas had positively received a ceasefire proposal made earlier this week.

In the region, attacks by Yemen’s Houthi forces on vessels in the Red Sea have continued to disrupt global trade, spurring geopolitical tensions and shipping concerns. The Iran-aligned group said on Thursday their naval forces had targeted an unidentified British merchant vessel in the Red Sea.

READ: UN alarmed by global trade disruption

On Thursday, two OPEC+ sources said the group has kept its oil output policy unchanged, and will decide in March whether or not to extend the voluntary oil production cuts in place for the first quarter.

The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, has outputs cuts of 2.2 million barrels per day (bpd) in place for the first quarter, as announced in November.

ANZ Research analysts said in a Friday note those production cuts should keep supply tight in the first quarter, with non-OPEC production increases set to normalize and U.S. output growth slowing in 2024 to 300,000 barrels per day (bpd) from 800,000 bpd last year.

Also supporting oil prices were the U.S. Federal Reserve’s decision to keep the benchmark overnight interest rate in the 5.25-5.5 percent range, and comments by Chair Jerome Powell who said that interest rates had peaked and would move lower in coming months.

Lower interest rates would reduce consumer borrowing costs, which can boost economic growth and oil demand.