There are numerous factors that have the potential to affect oil prices. Interestingly, oil prices rose on Friday, extending sharp gains in the previous session as frigid weather swept across large swathes of the United States, threatening to further disrupt oil supplies.
Brent crude gained 42 cents or 0.5% to $91.51 a barrel by 07:45 GMT. On Thursday, Brent crude gained $1.16.
U.S. West Texas Intermediate (WTI) crude advanced 52 cents or 0.6% to $90.79 a barrel. U.S. WTI crude added $2.01 on Thursday to settle above $90 for the first time since October 6, 2014. Both of them are headed for their seventh straight weekly gain.
Oil prices and various factors
As stated above, frigid weather swept across large swathes of the country. A massive winter storm created numerous problems in several states.
On Friday, tight oil supplies pushed the six-month market structure for WTI into a steep backwardation of $8.08 a barrel. Backwardation happens when prices for prompt spot trade are at a premium to future prices, and typically encourages traders to take oil out of storage.
Oil prices also benefited from geopolitical tensions in Eastern Europe and the Middle East. Brent futures rose by about 8% and WTI futures gained about 21%, so far this year.
On Wednesday, OPEC and its allies, together known as OPEC+, authorized another 400,000-barrel-per-day increase for March. But the problem is that OPEC+ was struggling to meet quotas even before the meeting. In December, production from OPEC+ countries rose by only 250,000 barrels per day or 63% of the group’s stated target. The International Energy Agency attributed most of the shortfall to reduced supply from Russia and Nigeria, both of them pumped below its monthly quota.
Besides, the modest output jump, even if delivered in full, is unlikely to reduce global oil prices.