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Oil prices take a breather as OPEC+ sticks to output plans

SINGAPORE (CNA) – Oil prices eased yesterday following weak United States (US) payrolls data and some profit taking, but remained underpinned by tight supply as the Organization of the Petroleum Exporting Countries Plus (OPEC+) and allies led by Russian producers stuck to planned moderate output increases.

Brent crude fell 37 cents, or 0.4 per cent, to USD89.10 a barrel by 1.27am GMT, after rising 31 cents on Wednesday. US West Texas Intermediate crude was down 54 cents, or 0.6 per cent, at USD87.72 a barrel, having gained six cents the previous day.

“This morning’s dip might be a result of the shockingly low US ADP employment print last night, but we believe the supply squeeze may drive oil prices higher through this year,” said economist at OCBC in Singapore Howie Lee.

US private payrolls fell for the first time in a year in January, raising the risk of a sharp decline in employment that would deal a temporary setback to the labour market.

Still, tight global supplies and geopolitical tensions in Eastern Europe and the Middle East have boosted oil prices by about 15 per cent so far this year. Over the past week, crude benchmarks hit their highest prices since October 2014, with US crude rising to as much as USD89.72 on Wednesday and Brent touching USD91.70 last Friday.

Prices were also pressured late on Wednesday after Iran’s Oil Minister said the country was ready to return to the oil market as quickly as possible, but offered few details.

“The oil market is not really any closer to seeing additional barrels of crude, but today we are not seeing any fresh catalysts to send prices to fresh highs,” said senior market analyst at OANDA Edward Moya.

OPEC+ agreed on Wednesday to stick to moderate rises of 400,000 barrels per day (bpd) in its oil output with the group already struggling to meet existing targets and despite pressure from top consumers to raise output more quickly.

“OPEC+ will save larger-than-expected production promises for when oil is over USD100 a barrel,” said Moya.

The group blamed surging prices on the failure of consuming nations to ensure adequate investment in fossil fuels as they shift to greener energy, while several OPEC+ sources also said prices had been pushed up by Russia-US tensions.

The OPEC+ Joint Technical Committee said in a report that it expects the overall surplus in 2022 to reach 1.3 million bpd, slightly less than its previous forecast of 1.4 million bpd.

US crude stockpiles fell by a million barrels last week, the US Energy Information Administration said on Wednesday, against expectations for an increase, while distillate inventories also dropped amid strong demand both domestically and in export markets.

Keeping a floor on prices, a major winter storm is expected to wallop much of the central US and stretch to parts of the north-east this week, bringing heavy snow, freezing rain and ice, the National Weather Service said. The storm comes days after a deadly winter blast and could boost prices of oil, especially as some regions substitute out natural gas where supply may be scarce.

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