Brent oil advances as investors weigh stockpiles, OPEC+ policy

Oil edged higher, with investors weighing the outlook for a tighter market as US stockpiles drop and OPEC+ keeps a tight rein on supply.

Brent crude climbed 0.2 per cent after ending 0.5 per cent higher on Monday, while West Texas Intermediate steadied. Steady declines in stockpiles this year have been a key factor supporting higher prices.

OPEC and its allies are due to gather next week to assess output policy. Russia expects the alliance will agree to increase production by just 400,000 barrels a day at the November 4 meeting, as previously agreed, Reuters reported, citing Deputy Prime Minister Alexander Novak. That follows weekend comments from Saudi Arabia’s energy minister that producers should remain cautious.

Oil is set for a monthly gain in October, building on six quarterly advances, as global demand recovers from the impact of the pandemic and a broader energy crunch supports gains. At the same time, the Organization of Petroleum Exporting Countries and its allies have eased supply curbs only gradually. That’s lifted prices, cut inventories, and enabled key time spreads to balloon.

“I think there is a big-and-growing bandwagon of oil bulls who need very little to keep their conviction,” said Vandana Hari, founder of Vanda Insights.

The crude market’s pricing structure remains deeply backwardated, a bullish pattern in which near-term prices are more costly than those further out. Brent’s prompt spread – the difference between its nearest two contracts – was at 81 cents a barrel, up from 72 cents a week ago.

Traders are also keeping tabs on talks that may eventually help to revive an Iranian nuclear accord, allowing a pickup in crude exports. Discussions between Tehran and the European Union are due to be held in Brussels on Wednesday, part of a drawn-out effort to clear the way for a wider diplomatic push.