Oil Holds Advance With OPEC+ Cutbacks and Geopolitics in Focus

(Bloomberg) -- Oil steadied after the biggest gain in a week, with OPEC+ set to affirm its policy of production cuts amid tensions in the Middle East and Russia.

Global benchmark Brent traded below $87 a barrel after rising 1.6% on Monday, while West Texas Intermediate was near $82. OPEC+ delegates aren’t seeing a need to change supply policy at a review meeting next week, according to several national officials, with quotas in place until June proving effective. The Houthis renewed threats against Saudi Arabia if it supported US strikes.

Crude has risen almost 13% so far this quarter after breaking out of a tight range that it was in for the first couple of months. Attacks by Ukraine on Russian refineries have aided gains, together with signs of strength in some product markets including gasoline. The positive overall market outlook has spurred hedge funds to increase their bullish bets on Brent.

In India, meanwhile, buyers of Venezuelan oil have halted purchases from the OPEC producer ahead of the expiry of a sanctions waiver in the middle of next month. That comes after the South Asian nation stopped accepting crude on tankers owned by Russia’s state-run Sovcomflot PJSC amid sanctions risks.

Signs of a shift in monetary policy have also aided sentiment. The Federal Reserve has signaled a willingness to cut interest rates later this year, buoying appetite for risk assets including oil. Crude futures have been tracking equity benchmarks in recent sessions.

“The risks of supply disruptions persist,” said Yeap Jun Rong, a market strategist at IG Asia Pte in Singapore, citing the Russia-Ukraine war as more refiners are hit. Weakness in the US dollar so far this week has also been supportive, he said.

The technical backdrop is positive, too, with Brent’s moving averages close to forming a golden cross, a bullish pattern. That’s when an asset’s 50-day moving average exceeds the corresponding 200-day figure. Its last formation for the generic contract in August preceded Brent surging by more than $10 a barrel to above $95.

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