Oil futures rose Wednesday, after U.S. government data showed the first decline in U.S. crude-oil inventories in six weeks.
Traders also awaited a key meeting of OPEC members set for Thursday and a separate gathering of members and their allies, a group collectively known as OPEC+, scheduled for Friday. Ahead of those meetings, expectations that the producers will announce a decision to extend and deepen output cuts has grown.
Read: Expectations grow for deeper oil production cuts by OPEC and its allies
West Texas Intermediate crude for January delivery
CLF20, +3.89%
on the New York Mercantile Exchange rose $2.28, or 3.8%, to $58.28 a barrel on the New York Mercantile Exchange, while February Brent crude
BRNG20, +3.42%
was up $2.14, or 3.5%, at $62.96 a barrel on ICE Futures Europe.
The Energy Information Administration on Wednesday reported that U.S. crude supplies fell by 4.9 million barrels for the week ended Nov. 29. That followed increases in each of the past five weeks. Analysts polled by S&P Global Platts forecast a fall of 700,000 barrels. The American Petroleum Institute on Tuesday reported a 3.7 million-barrel decline.
“A jump in refining activity and ongoing subdued net imports have helped yield the first draw to oil inventories in six weeks,” said Matt Smith, director of commodity research at ClipperData.
“Nonetheless, there are bearish elements to find in the report—both gasoline and distillates have registered inventory builds, despite refinery runs still lagging year-ago levels by nearly 700,000 [barrels per day],” he told marketWatch.
The EIA data showed supply increases of 3.4 million barrels for gasoline and 3.1 million barrels for distillates. The S&P Global Platts survey showed expectations for a supply climb of 2.7 million barrels for gasoline, while distillates were forecast to increase by 460,000 barrels.
On Nymex, January gasoline
RBF20, +3.06%
rose 3.4% to $1.616 a gallon, while January heating oil
HOF20, +2.65%
was up 3.1% at $1.9374 a gallon.
January natural gas
NGF20, -2.58%
fell 2% to $2.392 per million British thermal units, ahead of Thursday’s EIA report, which is expected to reveal a weekly decline of 21 billion cubic feet, according to analysts polled by S&P Global Platts.
Meanwhile, speculation has grown that OPEC+ will add to an existing agreement to curb output by 1.2 million barrels a day. That agreement is due to run out at the end of March.
“The OPEC and OPEC+ meetings on Thursday and Friday are about everything except maintaining things as is,” said independent energy expert Anas Alhajji, who’s also managing partner at Energy Outlook Advisors LLC.
“The case for a production cut is overwhelming,” he told MarketWatch, adding that the group may achieve that “through a rollover with strict compliance or through additional cut.”
In a note, Stephen Innes, chief Asia market strategist at AxiTrader, said he’s “sure OPEC is more than aware that oil traders will probably hammer oil prices materially lower in the absence of a supply cut, even more so given the diminishing near term trade deal optimism.”
So “crucial for oil price stability remains how OPEC+ will deal with expectations that a further production cut will be announced. They may need to give in to the market demands where they want to or not,” said Innes.
Oil posted a mixed performance Tuesday, with Brent crude, the global benchmark, seeing its lowest close in almost five weeks while WTI, the U.S. benchmark, rose. Some pressure was attributed to uncertainty over U.S.-China trade negotiations after President Donald Trump said there was no timetable for a deal and that it might be best to wait until after the 2020 election.
Those remarks contributed to a selloff in equities and other assets, including oil, perceived as risky as investors jumped into traditional haven assets. Stocks on Wednesday, however, found support after a Bloomberg report said Beijing and Washington were on track to complete a phase one agreement before a Dec. 15 deadline that would see the U.S. impose another round of tariffs on imports of Chinese goods.