Oil prices surged on Wednesday, hitting their highest in more than a year from a decision by OPEC and allies to stick to the plan to gradually restore supply, along with the slow pace of nuclear talks between Iran and the United States.
Brent rose $1.1, or 1.6%, to settle at $71.35 a barrel. It reached $71.48 a barrel, its highest since January 2020.
U.S. West Texas Intermediate (WTI) crude rose $1.11, or 1.6%, to settle at $68.83 a barrel. It hit $69.00 during the session, its highest since October 2018.
“The oil market welcomed the OPEC+ decision to stick with its existing production plan, and in conjunction with positive global demand indications, prices are gaining further today,” said Louise Dickson, Rystad Energy oil markets analyst.
Expecting a recovery in demand, the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, agreed on Tuesday to maintain their plan to gradually ease supply curbs through July.
The OPEC+ meeting took 20 minutes, shortest in the group’s history, indicating unity among members and their confidence in the market’s recovery, analysts said.
OPEC+ data shows the group is now more upbeat about the pace of rebalancing in the oil market than it was a month ago.
Saudi Energy Minister Prince Abdulaziz bin Salman said solid demand recovery in the United States and China and the pace of COVID-19 vaccine rollouts can only lead to further rebalancing of the global oil market.
“We expect oil prices to move well beyond $70 per barrel towards mid-year,” said Norbert Rucker, analyst at Swiss bank Julius Baer.
Analysts also said the slow progress of the Iran nuclear talks provides breathing room for demand to catch up before Iranian oil returns to the market if a deal is reached.
Talks aimed at reviving Iran’s nuclear pact with global powers were expected to adjourn for a week, diplomats said, with remaining parties to the deal due to meet on Wednesday evening to sign off on the move.
In the United States, crude stocks fell by 5.36 million barrels in the week ended May 28, according to two market sources, citing American Petroleum Institute figures released after the markets settled. Gasoline inventories rose by 2.5 million barrels and distillate stocks climbed by 1.56 million barrels.
U.S. government inventory data is due on Thursday at 11 a.m. (1500 GMT), delayed a day due to the Memorial Day holiday.