Oil Heads for Weekly Advance as Spreads Signal Market Strength

Oil was on track for a weekly gain as market gauges continued to show signs of strength, with OPEC+ set to decide early this month whether to extend supply cuts into the next quarter.

Brent futures climbed above $82 a barrel, and were up 0.8% for the week. West Texas Intermediate edged toward $79. Prompt spreads for both benchmarks expanded in a bullish backwardation structure last month, an indication of tightening physical crude markets.

Oil capped a second monthly increase in February, although prices remain in a tight trading range. Geopolitical tensions including the Israel-Hamas war have helped spur some of the gains, but rising non-OPEC supply and persistent concerns about Chinese demand have kept futures from rallying.

OPEC+ is expected to extend its current supply cuts into the next quarter in a bid to avert a global glut and prop up prices, according to a recent Bloomberg survey. The group has put in place about 2 million barrels-a-day of curbs.

Meanwhile, expectations that the US will hold interest rates steady for longer were bolstered when the Federal Reserve’s preferred inflation gauge rose by the fastest pace in nearly a year. That’s likely a headwind for wider energy demand, which hurts commodities including crude.