Oil halted a slide near $54 a barrel Wednesday as investors weighed industry data that showed U.S. crude inventories unexpectedly fell last week against doubts over OPEC’s plans to cut output.
Futures in New York rose as much as 2 percent, after plunging more than 6 percent on Tuesday. The American Petroleum Institute was said to report a 1.55-million-barrel drop in stockpiles last week, compared with a gain forecast in a Bloomberg survey before official data.
Meanwhile, U.S. President Donald Trump said Saudi Arabia has been “very responsive” to his requests to keep prices low, calling into question the Organization of the Petroleum Exporting Countries' (OPEC) resolve to trim supply.
Crude prices in London and New York collapsed along with equities on Tuesday amid the highest volatility since 2016. Investors fled risky assets including oil as they fretted about America’s confrontations with China over trade.
With OPEC and its allies scheduled to meet in Vienna early December to discuss output plans, the International Energy Agency warned that cutting supplies may have some negative implications.
“Some investors are coming back into the market after the massive plunge,” Sungchil Will Yun, Seoul-based commodity analyst at HI Investment & Futures, told Bloomberg. “While a lot of uncertainties lie ahead with the clouded outlook on OPEC+’s output curb plans, the unexpected decline in American inventories will ease some of the downward pressure.”
Analysts told the New York Times that pressure is building on OPEC to shore up prices when the organization along with Russia and other producers gather in Vienna in early December.
Analysts expect production cuts of around one million barrels a day, about 1 percent of world supplies, to be announced. "There is little doubt that the Saudis can make cuts of this scale. After all, they have lifted production by almost 700,000 barrels a day compared with their average output in 2017," the Times reported.
Saudi Arabia may try to persuade producers like Russia and Iraq to join in making cuts, analysts said. “In the end we think Putin will make the same call as he did in November 2016 and opt to join the OPEC producers because of domestic fiscal considerations,” Helima Croft, an analyst at RBC Capital Markets, wrote in a recent note to clients, the Times reported.
Wednesday in the oil market, West Texas Intermediate for January delivery rose as much as $1.05 to $54.48 a barrel on the New York Mercantile Exchange, and was at $54.33 at 3:48 p.m. in Singapore. The contract sank 6.6 percent to $53.43 on Tuesday. Total volume traded was 73 percent above the 100-day average.
Brent for January settlement gained 1.5 percent to $63.48 a barrel on the London-based ICE Futures Europe exchange. The contract settled 6.4 percent lower at $62.53, the lowest close since December. The global benchmark crude traded at a $9.11 premium to WTI for the same month.
Trump said he won’t let the murder of U.S.-based journalist Jamal Khashoggi jeopardize relations with the Saudis as oil prices may “go through the roof” if the relationship between the two nations breaks. The kingdom had previously sought curbs of about 1 million barrels a day, while Russia signaled the need for a “balanced decision.”
Meanwhile, the API was said to show nationwide crude inventories have slipped for the first time since mid-September ahead of government data due Wednesday. In contrast, a Bloomberg survey of analysts showed a 3.45-million-barrel increase last week in a median estimate.
© 2023 Newsmax Finance. All rights reserved.