Oil gains after big fall in US inventories, eyes OPEC meeting

Oil producers’ group is to decide whether to extend output cuts or reduce them

LONDON:

Oil prices rose on Wednesday after a sharp drop in US crude inventories, with the market waiting for Organisation of the Petroleum Exporting Countries (OPEC) and its allies to decide on the easing of output curbs later in the day as the global economy slowly recovers from the Covid-19 pandemic.

Brent crude futures were up $0.35, or 0.8%, at $43.25 a barrel as of 1015 GMT, and US West Texas Intermediate (WTI) crude futures rose $0.38, or 0.1%, to $40.67 a barrel.

US crude inventories fell by 8.3 million barrels in the week to July 10, beating analysts’ expectations for a decline of 2.1 million barrels, according to data from industry group the American Petroleum Institute.

Official numbers from the US Department of Energy are due later on Wednesday.

A key ministerial committee of OPEC and its allies will also meet on Wednesday after 1200 GMT.

OPEC and allies including Russia, collectively known as OPEC+, are set to decide whether to extend output cuts of 9.7 million barrels per day (bpd) that end in July or ease them to 7.7 million bpd.

“Most indications suggest that it will be the latter, with more focus on compliance and compensatory cuts,” ING Economics said in a note.

The real production increase from August could be less than 2 million bpd given Iraq, Nigeria and Angola promised to over-comply to make up for high output in May and June.

On Tuesday, OPEC said it saw demand recovering by 7 million bpd in 2021 after falling by 9 million this year.

Oil prices have recovered to almost $43 a barrel from a 21-year low below $16 in April. The recovery in prices has allowed some US producers to resume suspended production, a move that is set to weigh on OPEC’s decision on Wednesday.