Oil futures rose Friday, with the global benchmark nearing the $50-a-barrel threshold a day after the Organization of the Petroleum Exporting Countries and its allies agreed to ease production cuts more gradually than originally planned.
West Texas Intermediate crude for January delivery rose 47 cents, or 1%, to $46.10 a barrel on the New York Mercantile Exchange. February Brent crude, the global benchmark, was up 46 cents, or 0.9%, at $49.17 a barrel on ICE Futures Europe.
After protracted negotiations, OPEC+ announced Thursday that it reached an agreement to pare current production cuts of 7.7 million barrels per day to 7.2 million barrels per day beginning in January, effectively allowing output to rise by 500,000 barrels a day.
Crude output had been on track to rise by 2 million barrels a day in January.
“As it currently stands, OPEC’s production cuts, tapering on a gradual schedule, serves as a drawbridge for the oil market to continue the delicate rebalancing of global physical crudes,” said Michael Tran, commodity analyst at RBC Capital Markets, in a note.
Tran said the two most important physical market indicators — Atlantic Basin physical crudes and Asian refining margins — have both improved over the past month.
Atlantic Basin crude has been clearing and “finding pockets of demand at an increased cadence despite major funeconomic,” he said. “Despite a major test of market absorption rates, physical barrels are not distressed, cutting prices or being left behind.”