BackOil traders count down to critical OPEC+ meet with WTI near $61
Veteran OPEC-watchers still expect some extra barrels from the group, and there’s little chance output will be held at current levels
PremiumOil traded near $61 a barrel as investors waited for the outcome of a critical OPEC+ policy meeting later Thursday with no clear steer on how much supply the cartel will return to a fast-tightening market.
West Texas Intermediate fell 0.3% after rising 2.6% Wednesday, when prices got a lift from a record drop in U.S. fuel inventories. Group leaders Saudi Arabia and Russia held talks Wednesday seeking common ground on output as Riyadh urges caution but Moscow seeks to raise supply, according to a delegate.
Crude has surged this year after the Organization of Petroleum Exporting Countries and its allies slashed collective output to drive a rebalancing of the pandemic-roiled market. The aggressive supply management has helped to drain inventories, while worldwide demand recovers with the roll-out of vaccines. That’s spurred widespread expectations that the single largest actor in the global energy market will now loosen the taps.
Veteran OPEC-watchers still expect some extra barrels from the group, and there’s little chance output will be held at current levels. There are two elements to its debate: first, will the cartel proceed with a 500,000 barrel-a-day collective output hike in April? And second, how will Saudi Arabia phase out the extra cut of 1 million barrels a day it’s been making voluntarily?
Heading into the meeting, traders will be mindful that Saudi Arabia has developed a liking for bullish surprises. Energy Minister Prince Abdulaziz bin Salman triggered a surge in prices at the January session by springing a unilateral production cut on an unsuspecting market. Citigroup Inc. has advised its clients not to make bets on this OPEC meeting as “there are too many wildcards," according to Ed Morse, global head of commodities research.
Russian Deputy Prime Minister Alexander Novak outlined his position on Wednesday, saying that while there are many risks including lockdowns, “if we look at the situation, it is much better than a year ago, than in the autumn."
The backdrop to the upcoming gathering is a steady procession of indicators that oil consumption is on the mend. Among recent figures, data showed U.S. commutes are slowly returning to normal as states reopen, while the rate at which people are staying home fell to the lowest since Nov. 12.
U.S. government figures on Wednesday showed gasoline inventories sank 13.6 million barrels to 243 million barrels last week after a freeze disrupted the refining sector. At the same time, holdings of crude oil expanded.
Brent’s prompt timespread eased to 50 cents a barrel in backwardation on Wednesday. While that remains a bullish pattern -- with near-dated pries above those further out -- it is the lowest reading since Feb. 11.
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