WASHINGTON (DTN) -- Crude and refined product futures on the New York Mercantile Exchange and the Intercontinental Exchange rallied to just over one-year highs on Wednesday in another day of risk-on trade in financial markets. Reaffirmation from the Organization of the Petroleum Exporting Countries and Russia-led partners to achieve full conformity with their ongoing production agreement during the first quarter, now at 7.125 million barrels per day (bpd), spurred a fresh round of buying.
The 26th Meeting of the Joint Ministerial Monitoring Committee concluded Wednesday with an upbeat assessment of the oil market, saying the group is "optimistic for a year of recovery in 2021."
The committee noted compliance with the production accord exceeded 100% in January, with Nigeria, Iraq, and Kazakhstan seen compensating for overproduced volumes from previous months.
Despite the overall strong compliance, Russia and Saudi Arabia, cochairs of the JMMC, urged all participants to the agreement to fully deliver on their pledged cuts and to "stay on course, which has hitherto reaped rewards."
The committee estimated that since the OPEC+ April 2020 Ministerial Meeting, OPEC and non-OPEC countries have adjusted oil production down by a cumulative 2.1 billion barrels (bbl), stabilizing the oil market and accelerating the rebalancing process.
A Joint Technical Committee, which met on Tuesday, concluded the global market would likely be in deficit each month throughout 2021, peaking at 2 million bpd in May.
"While economic prospects and oil demand would remain uncertain in the coming months, the gradual rollout of vaccines around the world is a positive factor for the rest of the year, boosting the global economy and oil demand," the JMMC stated.
Wednesday's inventory data was mostly supportive for the oil complex, showing a larger than expected 994,106 bbl draw from U.S. commercial crude oil inventories while the domestic production rate has flatlined below 11 million bpd, indicating global oil supplies continue to tighten. Despite some bullish parts in Wednesday's EIA report, the data also showed demand for refined products declined by a cumulative 165,000 bpd in the final week of January, with gasoline consumption trailing about 10% below pre-pandemic levels. Distillate supplied to the U.S. market found support from a resurgence in ecommerce sales and over-the-road freight and rail traffic. The recent data, however, showed distillate consumption declined 102,000 bpd last week and stocks dipping a negligible 9,000 bbl on the week. The refining capacity utilization rate unexpectedly rose by 0.6% from the previous week to 82.3%.
At settlement, West Texas Intermediate futures for March delivery rallied 93 cents to $55.69 bbl before trading at a more than one-year high at $56.33 bbl, while front-month Brent futures on ICE gained $1 to finish at a one-year high $58.46 bbl. NYMEX ULSD March contract added 1.59 cents to $1.6905 gallon and the RBOB contact for March delivery surged 3.26 cents or 2% to settle at one-year spot high $1.6489 gallon.
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