- WTI briefly eclipsed the $80 per barrel level for the first time since mid-November as OPEC+ struggles to lift output.
- Crude oil prices have rallied despite recent downside in global equities after hawkish Fed minutes, and are watching Kazakhstan unrest.
Front-month WTI futures have surged on Thursday despite recent hawkish Fed minutes induced downside in other risk assets which oil tends to have a tight correlation to such as US and global equities. Prices momentarily eclipsed $80 per barrel for the first time since mid-November before easing back a little and at current levels in the mid-$79.00s, WTI is trading with gains of about $2.50 on the day. With the last key area of chart resistance in the $79.50 area ahead 2021 highs around $85.00 now cleared, oil bulls may now be expecting WTI to push more decisively into the $80s.
Supply-side rather than demand/macro dynamics have been dictating the price action in crude oil markets on Thursday. Kazakhstan’s 1.6M barrel per day (BPD) producing oil infrastructure is yet to face disruption, but civil unrest there adds further notable downside risk to OPEC+ supply at a time when other members are struggling to meet output quotas. Libya’s National Oil Company (NOC) said on Thursday that oil output currently stands at just over 700K BPD. Libyan output faces severe disruptions as infrastructure undergoes maintenance and repairs – output was as high as 1.3M BPD at the end of last year.
Libya has not been the only country struggling to hit output quotas and a Reuters survey release on Thursday highlighted this dynamic. The survey showed the group’s output only rose by 70K BPD in December, far below the 400K monthly output hike allowed under OPEC+’s agreement. The survey noted that output in Libya and Nigeria fell and that, as a result, OPEC+ net compliance with its output reduction pact rose in December to 127% from 1.20% in November. Concerns about OPEC+ struggles to lift output in line with plans and tightness this exerts upon global oil markets has distracted markets from the news that Saudi Arabia lowered its official selling price for all crude oil grades to Asian customers (an indicator of slowing demand).