Oil Prices Hit Highest Level in a Year After Stock Drawdown
US crude has hit peaks not seen since before the COVID-19 pandemic as OPEC moves to continue supply restrictions.
Oil prices hit one-year peaks on Friday amid hopes for a quick economic revival and a commitment by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies to restrain the supply of crude.
Brent crude futures reached $59.41 per barrel, a high not seen since 20 February 2020. Brent is currently on track to gain around 6% this week.
US West Texas Intermediate (WTI) crude futures also rose 0.5% to $56.52 after previously reaching a peak of $56.52 per barrel, its own highest level since 22 January 2020 – and is on track to achieve a weekly increase of 8%.
The backwardation of both benchmarks, where contracts for near-term delivery are more expensive than later supplies, reached their highest level in over a year at $2.30, showing expectations of tighter supply in the future.
The oil market has been shored up by supply restrictions from OPEC+, which on Wednesday announced member states’ “high compliance” with agreements to limit oil supply, forcing up prices.
In a statement released following a meeting of its Joint Ministerial Monitoring Committee on 3 February, OPEC said that countries had held back production by a total of 2.1 billion barrels since April 2020, when the market suffered an unprecedented shock. A combination of the dawning COVID-19 pandemic and a price war between Russia and a Saudi-led coalition drove prices to historically low levels, with futures even turning negative for a brief while.
“The committee welcomed the positive performance of participating countries,” OPEC said. “Participants pledged to achieve full conformity and make up for previous compensation short-falls, and stressed the importance of accelerating market rebalancing without delay.”
Government data also released on Wednesday showed that US crude oil stockpiles unexpectedly fell to 475.7 million barrels last week, their lowest level since last March.