Oil Halts Losses on Eve of OPEC+ Meeting
(Bloomberg) -- Oil rebounded after a three-day fall with the OPEC+ alliance said to be poised to agree an output increase at its meeting this week, a sign of the market’s underlying resilience as the impact of the pandemic ebbs.
West Texas Intermediate gained 0.4% following the worst losing run since December as Brent also rose. The widespread view among the group is the market can absorb extra barrels, according to people familiar with the matter.
Oil has staged a powerful rally this year, driven by significant OPEC+ curbs -- including unilateral cuts by Saudi Arabia -- and a vaccine-aided rebound in demand. That strength has paved the way for the alliance to return some barrels, with OPEC Secretary-General Mohammad Barkindo saying on Tuesday that the economic outlook and oil market continue to improve. The grouping could return the bulk of the 1.5 million barrel-a-day hike that’s up for debate.
“Tomorrow is an important day but it’s very much unclear how much OPEC will add,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “I don’t think the Saudis will return their additional cuts fully.”
In addition to the focus on the OPEC+ deliberations, traders were also tracking events in the Middle East. Ten rockets targeted Iraq’s Al Asad Airbase hosting coalition troops on Wednesday, accoding to a coalition spokesman.
There are two parts to the production rise that the Organization of Petroleum Exporting Countries and allies will address. First, will the cartel proceed with a 500,000 barrel-a-day collective hike in April? Second, how will Saudi Arabia phase out its extra reduction of 1 million barrels a day it made voluntarily?
Bulls may draw comfort from further signs the pandemic is ebbing. In the U.S., the daily case count fell to its lowest in more than four months, while economic indicators continued to improve. In Asia, Indian fuel demand will reach a record in the 12 months through March 2022, according to the Petroleum Planning and Analysis Cell of the nation’s oil ministry.
In an additional positive indicator that economies are on the mend, data Wednesday showed Australia powered into 2021. Gross domestic product jumped 3.1% in the final three months of last year, pointing to a V-shaped recovery.
The gathering pace of recovery presents “the perfect opportunity for OPEC+ to raise production,” Australia & New Zealand Banking Group Ltd. said in a note, predicting that the group will agree to add 750,000 barrels per day.
Still, U.S. crude inventories rose more than 7 million barrels last week, the American Petroleum Institute reported, according to people familiar. If confirmed by the official tally, that would be the largest weekly build since December. The API figures also showed drops in gasoline and distillates.
Shifts in Brent’s prompt timespread point to an easing of near-term tightness. It was at 52 cents a barrel in backwardation on Wednesday, down from 86 cents a week ago.
© 2021 Bloomberg L.P.
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