DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange reached highs that haven't been seen in years on Wednesday, with West Texas Intermediate settling at a nearly 11-year high and Brent at a nearly eight-year high. The gains came after the Organization of the Petroleum Exporting Countries and partners outside of the cartel agreed on a gradual production increase for next month despite deteriorating events in Europe amid an escalating conflict in Ukraine by Russia that is leading to a growing shortfall in the country's oil exports.

Prospects of limited new supply from an oil alliance led by Saudi Arabia and a real-time disruption in crude oil exports from Russia, the world's second-largest oil producer, sent oil prices skyrocketing this week.

On Wednesday, OPEC+ decided to maintain their existing plans for increasing collective oil output by 400,000 barrels per day (bpd) for April, continuing the terms of an agreement reached in July 2021 as they gradually unwind production cuts made early in the pandemic in April 2020. OPEC+'s reluctance to change strategy is likely influenced by the inability of some producers within the group to meet their current output targets. In February, Iraq, the second-largest producer within OPEC, missed its production target by 150,000 bpd, lifting compliance with the OPEC+ agreement to 146%, according to analysts. That compares with a 125% compliance rate for January, meaning that supply shortfall from OPEC+ producers is widening.

OPEC+'s decision comes amid extremely tight global market fundamentals. Oil in commercial stockpiles of countries that are part of the Organization for Economic Cooperation and Development in January were at their lowest point in seven years, according to an International Energy Agency report from February.

As of mid-February, inventories in the United States were more than 10% below their five-year average. Energy Information Administration once again reported on Wednesday domestic crude oil inventories fell by a larger-than-expected 2.6 million barrels (bbl) in the final week of February. Oil stored at the Cushing tank farm in Oklahoma, the delivery point for WTI futures, fell 972,000 bbl from the previous week to 22.8 million bbl, according to EIA. The large crude draw came as domestic refiners increased run rates by 0.3% last week to 87.7%, processing 153,000 bpd more crude compared to the previous week.

On the battlefield in Ukraine, Russian troops seized the strategically important city of Kherson on Wednesday, Ukrainian officials confirmed, in a significant moment in the battle for the county's South. Explosions also struck near the capital of Kiev while Russian troops continued to lay siege to Kharkiv, Ukraine's second-largest city.

As Russian troops pressed deeper into Ukraine, the death toll among the civilians climbed exponentially. Ukrainian officials said that the civilian death toll climbed to 2,000 on Wednesday -- a much higher number than reported by the United Nations human rights office. For the first time, Russia's Defense Ministry acknowledged extensive losses in the seven days of war, saying that 498 Russian troops were killed and 1,597 injured. Moscow said its forces killed 2,870 Ukrainian soldiers. The conflict clearly entered a new dangerous stage of urban warfare.

On Monday, the International Criminal Court said it would open an investigation into whether Russia has committed war crimes and crimes against humanity in Ukraine. The decision came just hours after reports emerged that the Russian military has begun indiscriminate shelling in Kharkiv, which has a population of about 1.5 million people, while a large military convoy descends upon Kiev.

On the session, NYMEX April WTI surged more than $7 to settle at $110.60 per bbl, and ICE Brent May contract jumped to $112.93 bbl, up $7.96 on the session. NYMEX April RBOB futures rallied more than 21 cents to $3.3083 gallon, a nine-year high settlement on the spot continuous chart, and April ULSD futures spiked 34.36 cents to $3.4947 gallon -- a 14-year high spot settlement.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges can be reached at liubov.georges@dtn.com