Oil futures declined on Wednesday after OPEC+ agreed to stick with its timetable for delivering another 400,000 barrel-a-day rise in March.
Traders also weighed weekly supply data showing a fall in U.S. crude and rise in gasoline.
Now the question becomes will all OPEC+ members, comprised of the Organization of the Petroleum Exporting Countries and their allies, be “able to meet the higher production quotas,” said Rob Thummel, senior portfolio manager, at TortoiseEcofin. “Certain countries within OPEC+ are not producing enough oil volumes to meet current production quotas.”
West Texas Intermediate crude for March delivery CL.1, -0.67% CL00, -0.67% CLH22, -0.67% fell 71 cents, or 0.8%, to $ 87.49 a barrel on the New York Mercantile Exchange after touching a high of $ 89.72. The U.S. benchmark settled Tuesday at its highest since October 2014.
April Brent crude BRN00, -0.43% BRNJ22, -0.43%, the global benchmark, was down 55 cents, or 0.6%, at $ 88.66 a barrel on ICE Futures Europe after trading as high as $ 90.52.
“As global demand for crude oil continues to recover, accelerating in the northern hemisphere during the summer, it is important that OPEC+ meet its production targets to keep the global oil market adequately supplied,” Thummel told MarketWatch. “If OPEC+ is unable to meet production targets, then the global oil market could become undersupplied which means oil prices are likely to move higher.”
In One Chart: Why OPEC+ can’t hit its oil production targets — and what it could do about it
The group has resisted pressure from the U.S. and major oil-consuming countries to more aggressively raise output, though some analysts have argued that a rise in crude prices to seven-year highs could prompt fears of demand destruction, warranting a more aggressive output boost.
Oil demand remains “healthy, and demand destruction from higher prices is likely not a significant concern at this point,” said Stacey Morris, director of research at index provider Alerian.
With spare production capacity limited, and some countries struggling to restore production, “supply is likely to remain in focus,” she said. “U.S. producer restraint, driven by capital discipline, also contributes to tighter global oil supplies.”
Traders also got an update on U.S. petroleum inventories from the Energy Information Administration.
The EIA reported Wednesday that U.S. crude inventories fell by 1 million barrels for the week ended Jan. 28. On average, analysts had forecast an increase of 1.1 million barrels, according to a poll conducted by S&P Global Platts.
The American Petroleum Institute on Tuesday reported a 1.6 million-barrel decrease.
The EIA also reported a weekly inventory climb of 2.1 million barrels for gasoline, while distillate stockpiles fell by 2.4 million barrels. The S&P Global Platts survey expected a supply climb of 1.7 million barrels for gasoline, but an inventory decline of 1 million barrels for distillates.
In Wednesday dealings on Nymex, March gasoline RBH22, +0.38% traded at $ 2.58 a gallon, up 0.2%, while March heating oil HOH22, +0.02% shed 0.1% to $ 2.738 a gallon.
Crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 1.2 million barrels for the week, EIA data showed. The Strategic Petroleum Reserve saw crude stocks fall by 1.9 million barrels last week.
Meanwhile, natural-gas futures rallied, with winter storms brewing and boosting demand expectations for the fuel.
March natural gas NGH22, +12.78% traded at $ 5.381 per million British thermal units, up by more than 13%.
“Freezing temperatures and snow are expected to settle across parts of the Northeast, Midwest, and South” through the weekend, said Christin Redmond, commodity analyst at Schneider Electric, in a note. “Frigid conditions in Texas though threaten to cause freeze-offs at oil and gas production sites, which could reduce supply again, similar to what occurred in early January this year and February last year.”
Also the EIA is expected to report on Thursday a weekly decline in U.S. natural-gas supplies in storage that’s well above the five-year average. On average, analysts expect a decline of 274 billion cubic feet, according to survey by S&P Global Platts, which pegged the five-year average supply fall for the period at 150 billion cubic feet.