Oil prices extended gains on Wednesday, rising towards $81 a barrel after OPEC+ producers stuck to an agreed output target rise for February and investors assessed the impact of a spike in COVID-19 cases caused by the Omicron variant.
U.S. West Texas Intermediate (WTI) crude futures rose 86 cents, or 1.12%, to $77.55.
OPEC+ producers, which include members of the Organization of the Petroleum Exporting Countries along with Russia and others, on Tuesday agreed to add another 400,000 barrels per day of supply in February, as they have done each month since August.
The United States reported nearly 1 million new coronavirus infections on Monday, the highest daily tally of any country in the world and nearly double the previous U.S. peak set a week earlier.
While OPEC+ raised its output target, it will likely struggle to reach it, as members including Nigeria, Angola and Libya face difficulties ramping up production, Barclays analysts said in a note.
“OPEC+ has adopted the path of least (political) resistance, as it continues to stay the course on increasing output targets, but actual incremental supplies are likely to be much smaller, similar to the demand effect from Omicron.”
The bank expects Brent oil prices to average $80 a barrel in 2022.
Data showing a sharp rise in U.S. inventories last week also weighed on prices.
U.S. gasoline stockpiles rose by 7.1 million barrels in the week to Dec. 31, the American Petroleum Institute (API) reported late on Tuesday. Distillate stockpiles climbed by 4.4 million barrels in the week.