Oil futures were trading slightly higher Wednesday ahead of a meeting of members of OPEC and its allies to discuss the outlook for crude production in the recovery phase from the global COVID pandemic.
Market participants were also dealing with the effects of Hurricane Ida which hit the U.S. Gulf Coast last Sunday and temporarily disabled swaths of production and oil refineries in the region.
West Texas Intermediate crude for October delivery
was trading 12 cents, or 0.2%, higher at $68.62 a barrel, after the contract for U.S. benchmark oil fell 1% on Tuesday on the New York Mercantile Exchange.
In August, prices for the front-month contract ended 7.4% lower, the first monthly loss since March, according to Dow Jones Market Data.
Meanwhile, global benchmark November Brent crude
added 11 cents, or 0.2%, at $71.74 a barrel, following a 0.6% decline in the session before, which contributed to its monthly loss of 4.4%. The October Brent contract, which had been the most-active expired at the end of Tuesday.
The Organization of the Petroleum Exporting Countries and its allies, a group collectively known as OPEC+ agreed earlier this year to unwind production cuts, boosting output in monthly increments of 400,000 barrels a day. The Biden administration subsequently pressed the group to further increase output.
Crude-oil watchers aren’t expecting any major changes to OPEC+’s output plans and a number of analysts believe that even with an increase in production, oil inventories oil will see a drawdown this year as demand recovers from the pandemic.
“OPEC is expected to stick to the production revival plan, as even with OPEC adding 400,000 barrels each day to the end of this year, the fuel stockpiles will decline by more than 800,000 barrels in average. That’s good news for the oil bulls,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote, in a daily research note.
That said, he cautioned that the global crude market could return to a glut by 2022 and remain that way for a year.
“So that to me is a strong hint that we don’t have much upside potential above the $70 pb in US crude, unless we see a surprise action taken by OPEC one of these days, the analyst wrote.
Meanwhile, traders continue to watch the recovery efforts for Gulf Coast refinery operations in the wake of Hurricane Ida, with an estimated that 93.69% of current oil production in region shut in, along with 94.47% of natural-gas production, according to the Bureau of Safety and Environmental Enforcement on Tuesday.
Natural-gas futures for October
were trading 9 cents, or 2.2%, higher at $4.47 per million British thermal units, following a 1.7% gain on Tuesday.
October gasoline futures
edged down by a penny, or 0.6%, to $2.13 a gallon, following a 0.6% decline a day ago.
In inventories, U.S. crude supplies fell by about 4 million barrels for the week ended Aug. 27, according to sources, citing data from the American Petroleum Institute. The API report, however, also showed an inventory increase of 2.7 million barrels for gasoline, while distillate stockpiles fell by roughly 2 million barrels. Crude stocks at the Cushing, Okla., storage hub, meanwhile, edged up by 2.1 million barrels for the week, sources said.
The data come ahead of a more closely watched report from the Energy Information Administration later Wednesday and is expected to show crude inventories down by 4.4 million barrels, according to a survey of analysts conducted by S&P Global Platts.