Oil futures: Crude off highs as OPEC+ delays output cuts until Q2

Quantum Commodity Intelligence - Crude oil futures Thursday were little changed with the OPEC+ decision to delay planned output increases by another quarter seen as only moderately supportive, as the group also announced a fresh timeline for increases. 

Front-month Feb25 ICE Brent futures were trading at $72.28/b (2020 GMT) versus Wednesdays' settle of $72.31/b, having peaked at $72.92/b earlier in the session and down from a midweek high of over $74/b.

At the same time Jan25 NYMEX WTI was trading at $68.53/b, versus Wednesday's settle of $68.54/b.

Prices initially plunged by around $1/b after first reports of the deal came out, with focus on the unwinding timeline rather than the delay, before recovering slightly.  

Benchmarks had already struggled to maintain gains from earlier in the week as broader demand concerns outweighed the widely-expected new OPEC+ plan.

Prior to the meeting analysts said that Saudi-led efforts to build a consensus around a postponement of planned increases had been successful, but the deal still faced hurdles with a number of side issues that need to be resolved.

These include greater compliance against individual quotas, compensation cuts aimed at overproducers and accommodating the UAE's higher baseline level that allows it to pump more oil next year.

The midweek retreat was also in part triggered by a WTI sale of 4,000 lots, or 4 million barrels, reportedly by a bank. Although a relatively small volume over a day, it was viewed as a significant move from a single entity.  

Trade

But fears over a looming tariff-led trade war have weighed heavily, while political upheaval in France and South Korea has also dented sentiment.

"Trump 2.0 tariffs are likely to disrupt, not upend, the U.S. economy. Economic expansion is still likely, albeit at a slower pace, while inflation could remain above the Fed's target as consumers at least partly bear the cost of tariffs," said Wells Fargo bank in its latest report.

However, the Federal Reserve's next rate decision comes in two weeks, with markets pricing in a 75% probability that the FOMC will reduce its key borrowing rate by 25 basis points.

Latest inventory data from the EIA did little to support prices despite a 5 million barrel draw in crude stocks, which was largely offset by builds in gasoline and distillates.

Softer refining margins, led by a reversal in gasoil cracks, have also knocked the crude complex this week.