Oil rises for third day with OPEC+ decision, stockpiles in focus
NEW YORK: Oil rose for a third day after industry data pointed to a substantial draw in US crude stockpiles and investors counted down to an OPEC+ meeting that will be held virtually this weekend.
West Texas Intermediate (WTI) climbed toward $79 a barrel after adding 2.5% over the previous two sessions. The industry- funded American Petroleum Institute reported inventories fell by almost 8 million barrels last week, according to people familiar with the figures. Official data follows later on Wednesday.
The Organization of Petroleum Exporting Countries and allies including Russia will hold an online gathering on December 4, scrapping an in-person meeting in Vienna. While some market observers expect the alliance to cut supply to counter market weakness, others are now wondering if the change of plan signals a more straightforward rolling over of production levels. The gathering comes the day before a deadline for European Union sanctions on Russian crude flows, although a related price cap has yet to be finalized.
Crude has retreated about 9% this month on concern that a global economic slowdown will sap energy demand, with widely watched market metrics signaling ample near-term supply. Traders are also tracking events in covid-hit China as Beijing pushes for more vaccinations among seniors, a move seen as crucial for an eventual reopening after a wave of protests on the weekend over the country’s strict covid zero policy.
OPEC+ will likely agree to “keep output levels unchanged, particularly given the group is set to meet virtually,” said Vivek
Dhar, mining and energy commodities analyst at Commonwealth Bank of Australia.
Brent is expected to average $ 95 a barrel this quarter, although concerns over China’s demand and likelihood of a high Russian oil- price cap could weigh on prices, he said.
Data from China on Wednesday highlighted the economic challenges, with figures showing factory and services activity contracted further in November as a record number of covid cases prompted widespread movement curbs.
Key time spreads are signaling abundant near-term supply, with Brent and WTI’s prompt spreads -- the gap between the nearest two contracts -- in a bearish contango pattern.
The figure for Brent was $1.10 a barrel in contango, compared with 66 cents in the opposite backwardated structure last week.
EU diplomats have been seeking a compromise on the level of the US-led cap, which is among moves to punish Moscow for the war of Ukraine by curbing revenue while keeping the nation’s crude flows going.
US energy security adviser Amos Hochstein said the plan needs to strike a “delicate balance.”