WTI supported close to multi-year highs above $88.00 despite speculation of larger OPEC+ output hike

Oil prices have continued to trade close to multi-year highs and within recently established ranges on Tuesday, with front-month WTI futures undulating between lows in the $86.00s and highs in the $88.00s. At current levels just above $88.00 per barrel, WTI is trading flat on the day and is less than $1.0 below the seven-year highs printed back last Friday at $88.82. Traders were passing round/discussing a note from Goldman Sachs on Tuesday that suggested that OPEC+ could add more supply than expected at the coming meeting amid high oil prices.

OPEC+ meet later in the week to set policy and sources had previously indicated that the group would in March stick to their current policy of increasing oil production quotas by 400K barrels per day each month. However, Goldman Sachs flagged the risk that the group goes further than adding 400K additional daily barrels, saying “we view growing potential for a faster ramp-up at this meeting, given the pace of the recent rally and the likely pressure from importing nations”. They said the outcome of the meeting remained “evenly balanced” between a larger than 400K output hike versus and a continuation of the current policy.

Speculation of a larger supply increase hasn’t dented oil prices. Indeed, OPEC+’s Joint Technical Committee, who always meet the day before the OPEC+ oil ministers, just wrapped up and did not discuss a larger than 400K barrel per day output hike in March, suggesting that a larger hike is unlikely. Meanwhile, even if the group did surprise with a larger than expected output hike announcement later this week, doubts remain about the ability of smaller OPEC+ producers to meet their rising output quotas. A Reuters survey released on Tuesday showed that OPEC+ production in January was 824K barrels per day lower than allowed by the group’s output quotas.

Elsewhere, analysts continue to cite ongoing geopolitical tensions (Ukraine/Russia/NATO), a lack of progress in nuclear negotiations between Western powers and Iran about a potential easing of the latter’s oil export sanctions and robust/recovering global demand as supportive for oil prices. Looking ahead, US weekly private API oil inventory figures are released at 2130GMT and are expected to show another build.