Oil prices jumped 2pc on Tuesday, with U.S. crude hitting its highest since 2014 and Brent futures climbing to a three-year high, after the OPEC+ group of producers stuck to its planned output increase rather than raising it further.
On Monday, OPEC+ agreed to adhere to its July pact to boost output by 400,000 barrels per day (bpd) each month until at least April 2022, phasing out 5.8 million bpd of existing production cuts.
U.S. West Texas Intermediate (WTI) oil was up $1.45, or 1.9pc, at $79.07 a barrel at 12:50 p.m. EDT (1650 GMT).
During the session it surged as high as $79.48, the most in nearly seven years. Brent crude was up $1.55, or 1.9pc, to $82.81. Earlier, it hit a three-year high of $83.13.
Both contracts extended gains made on Monday, when they each rose more than 2pc.
"The market is realizing we are going to be undersupplied for the next couple of months and OPEC seems to be happy with that situation," said Phil Flynn, an analyst at Price Futures Group in Chicago.
Oil settles near 3-year high ahead of OPEC+ meeting
Oil prices have already surged more than 50pc this year, adding to inflationary pressures that crude-consuming nations such as the United States and India are concerned will derail recovery from the COVID-19 pandemic.
Late last month, the OPEC+ Joint Technical Committee (JTC) said it expected a 1.1 million bpd supply deficit this year, which could turn into a 1.4 million bpd surplus next year.
Despite pressure to ramp up output, OPEC+ was concerned that a fourth global wave of COVID-19 infections could hit the demand recovery, a source told Reuters a little before Monday's talks.
Speculator buying has also driven up oil prices but some technical indicators suggest the market may be overbought, said Robert Yawger, director of the futures division at Mizuho Americas.
"At some point you run out of people to push it and the last long (position) is already in the market," Yawger said.
Investors will look to Wednesday's crude inventory data from the U.S. Energy Information Administration for further direction.
U.S. crude oil and distillate inventories are likely to have fallen last week, a preliminary Reuters poll showed.
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