Brent crude oil futures hit a three-year high on Tuesday while U.S. benchmark crude reached close to 2014 peaks after the OPEC+ group of producers stuck to its planned output increase rather than pumping even more crude.
OPEC+ agreed in July to boost output by 400,000 barrels per day (bpd) each month until at least April 2022 to phase out 5.8 million bpd of existing production cuts.
Brent crude settled 1.6% higher at $82.56 per barrel, having risen 2.5% on Monday. U.S. West Texas Intermediate (WTI) oil settled $1.31, or 1.7%, higher at $78.93 per barrel after gaining 2.3% in the previous session.
Oil prices have already surged more than 50% 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.
The OPEC+ Joint Technical Committee (JTC) said late last month that it expected a 1.1 million bpd supply deficit this year, which could turn into a 1.4 million bpd surplus next year.
Despite the 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 the vote.
"The (price) move looks a bit outsized given the ministers just reaffirmed the decision announced in July, but it shows how tight the market is, reinforcing our view of asymmetric price action with risks skewed to the upside at these inventory levels," Barclays said in a note.
Meanwhile U.S. crude oil and distillate inventories are likely to have fallen last week, a preliminary Reuters poll showed.
Five analysts surveyed by Reuters estimated on average that crude inventories declined by about 300,000 barrels in the week to Oct. 1.