Oil futures trimmed losses Wednesday following reports that Saudi Arabia and the United Arab Emirates reached a deal that would allow an OPEC+ plan to further ease output curbs through the end of the year to proceed.

West Texas Intermediate crude for August delivery
CL00,
+0.21%

fell 30 cents, or 0.4%, to $74.95 a barrel on the New York Mercantile Exchange. September Brent crude
BRN00,
+0.26%
,
the global benchmark, was down 13 cents, or 0.2%, at $76.36 a barrel on ICE Futures Europe.

Crude prices initially dipped following reports of a deal, but then pared losses.

Saudi Arabia and the United Arab Emirates reached a deal Wednesday that would allow a stalled OPEC+ deal on output levels to proceed, with the U.A.E. allowed to boost the baseline used to determine how much crude it’s allowed to pump, Reuters reported, citing an OPEC+ source.

OPEC+ talks on a proposal to lift production by a cumulative 2 million barrels a day between August and December fell apart earlier this month after the U.A.E. insisted that its baseline should be raised from around 3.16 million barrels a day. Reuters reported that the UAE’s baseline would be lifted to 3.65 million barrels per day after the current pact on production curbs expires in April 2022. 

“The fact that oil prices rose after initially falling [in reaction to the news] is a reflection of reduced uncertainty,” said Fawad Razaqzada, analyst at ThinkMarkets, in a note.

The lack of a deal had stirred fears of a potential free-for-all that would see U.A.E. and others abandon the deal on output curbs.

“With the agreement likely to be extended until end of 2022, supply will return slowly to the market and reduce the risks of supply shocks,” Razaqzada said. “The key risk now is if demand fails to grow as expected, which is directly linked to the virus situation and the potential for further lockdowns.”

Meanwhile, U.S. crude inventories are expected to show another fall.

The American Petroleum Institute, an industry group, reported late Tuesday that U.S. crude supplies dropped by 4.1 million barrels for the week ended July 9, according to sources. The API report also reportedly showed a decline of nearly 1.6 million barrels for gasoline stockpiles and an increase of 3.7 million barrels for distillate inventories.

Crude stocks at Cushing, Oklahoma, the delivery hub for Nymex futures, edged down by 1.6 million barrels for the week, sources said.

More closely followed inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA is expected to show crude inventories declined by 4.9 million barrels, according to a survey of analysts conducted by S&P Global Platts. The survey also calls for a supply decrease of 1.6 million barrels for gasoline and inventory climb of 1.3 million barrels for distillates.

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