U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday shortly before the regular session opening after giving up earlier gains. There is no clear reason for the price adjustment at this time, but it may be related to position-squaring ahead of this morning’s U.S. Energy Information Administration’s weekly inventories report.
Earlier in the session WTI crude oil rose to its highest level since March 9, while Brent touched its highest price since March 11.
Brent made the most significant advance, moving above $40 a barrel for the first time since March, supported by signs of recovery in coronavirus-hit demand, lower U.S. inventories and expectations that OPEC+ will keep oil output cuts in place.
Additionally, in a move that suggests the supply glut is easing, the American Petroleum Institute (API) late Tuesday said U.S. crude inventories fell by 483,000 barrels.
OPEC+ Expected to Keep Production Cut Deal in Place
OPEC+ is expected to hold their next meeting on Thursday. The change in the meeting date came about after OPEC member Algeria, which currently holds the rotating presidency of the group, proposed that the meeting should be brought forward from the original date of June 9-10.
In April, OPEC+ agreed to cut oil production by a record 9.7 million barrels per day (b/d), approximately 10% of global output. The move was designed to prop up prices as the coronavirus pandemic led to an unprecedented collapse in oil demand.
Encouraged by signs of recovery in the market, OPEC+ is considering extending the cut beyond June. Reports say that the new alliance will probably extend the commitment to reduce oil production by 9.7 million b/d from July to September.
API Reports Surprise Draw
Crude oil prices rose late Tuesday after the American Petroleum Institute (API) weekly inventories report showed a small crude oil inventory draw of 483,000 barrels for the week-ending May 29. Analysts were looking for a build of 3.038 million barrels.
The API also reported a build of 1.706 million barrels of gasoline for the week-ending May 29 compared to last week’s 1.120-barrel build. This week’s draw compares to analyst expectations for a 1.0 million barrel build for the week.
Distillate inventories were up by 5.917 million barrels for the week, compared to last week’s 6.907-million-barrel build, while inventories at the Cushing, Oklahoma futures hub fell by 2.2 million barrels.
The U.S. Energy Information Administration (EIA) will release its weekly inventories data today at 14:30 GMT. Traders are looking for a 3.0 million barrel build. Matching this estimate could put pressure on prices, while an unexpected draw could turn prices higher for the session.
As often is the case, we may see news that Russia is fouling up the preliminary negotiations for the output cut extensions. Although the Russians are likely to eventually reach a common ground with OPEC+, they may try to push for a 1 to 2 month deal rather than the widely expected 3 month extension.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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