MW Oil prices make modest moves as attention turns to OPEC+ decision on crude production
By Myra P. Saefong and William Watts
EIA reports a smaller-than-expected fall in U.S. crude inventories, rise in fuel stocks
Oil futures seesawed between modest gains and losses Wednesday after a cease-fire between Israel and Iran-backed Hezbollah eliminated much of the remaining risk premium around a wider Middle Eastern conflict, leaving traders to focus on a weekend meeting of the Organization of the Petroleum Exporting Countries and its allies.
Traders also looked to official U.S. inventory data which revealed a weekly fall in domestic crude inventories that was less than expected, along with gains for gasoline and distillate supplies. U.S. trading volume was lower than usual ahead of Thursday's Thanksgiving Day holiday.
Price moves
-- West Texas Intermediate crude CL00 for January delivery CL.1 CLF25 rose 11 cents, or 0.2%, to $68.88 a barrel on the New York Mercantile Exchange.
-- January Brent crude BRNF25, the global benchmark, was up by a penny, or less than 0.1%, at $72.82 a barrel on ICE Futures Europe. The more actively traded February contract BRN00 BRNG26 rose 4 cents, or less than 0.1%, to $72.36 a barrel.
-- December gasoline RBZ24 edged down by 0.7% to $1.9779 a gallon, while December heating oil HOZ24 shed 0.8% to $2.2222 a gallon.
-- Natural gas for January delivery NGF25 traded at $3.254 per million British thermal units, down 6.2%.
Market drivers
The ceasefire agreement in Lebanon, which "reduces tensions in the Middle East, acts as a stabilizing factor" for oil, said Rania Gule, senior market analyst at XS.com. However, this event will likely have a "limited long-term impact, as markets remain highly sensitive to any potential escalation in the region."
Oil prices edged up after back-to-back losses that came in response to reports an Israel-Hezbollah cease-fire deal was in the works. On Tuesday, Israel approved a U.S.-brokered cease-fire agreement with Lebanon's Hezbollah, according to the Associated Press, easing concerns - at least for now - over what was once a source of geopolitical tension. Crude had rallied last week as tensions between the West and Moscow intensified over the Ukraine-Russia war.
For now, markets were "adjusting to the reduced likelihood of a broader Middle East conflict following news of the cease-fire, said Ricardo Evangelista, senior analyst at ActivTrades. "Geopolitical risk had been a critical driver of oil prices for an extended period, as concerns over escalating tensions along Lebanon's southern border fueled fears of disruptions to crude flows from the Gulf, the world's primary export region."
Attention, meanwhile, has turned to a Sunday meeting of OPEC+ ministers. In early November, OPEC+ said it would extend 2.2 million barrels a day of voluntary production cuts to the end of December. That meant it would delay a gradual increase in output that had been expected to start in the final month of this year.
Read: Trump's oil-drilling plans may pose a big problem for OPEC+
The modest oil-price gain "underscores an immediate response to reports that OPEC+ members are engaged in discussions to extend production cuts," Gule said in market commentary. "Should these measures be confirmed, they will undoubtedly support prices in the coming period, signaling a positive trend towards restoring balance in an otherwise volatile market."
Meanwhile, calls by President-elect Donald Trump and proposed cabinet members to significantly boost U.S. crude production pose a potential threat to OPEC+ market share, though skeptics question how quickly or how much U.S. producers are likely to increase output.
"If OPEC+ does not return barrels to market now and try to recapture market share from producers in the Western Hemisphere including the U.S., Canada, Brazil, and Guyana, then when will they make their move?" said Robert Yawger, executive director for energy futures at Mizuho Securities, in a note.
Supply data
Also on Wednesday, the Energy Information Administration reported that U.S. commercial crude inventories fell by a smaller-than-expected 1.8 million barrels for the week ended Nov. 22.
The report was expected to show a decline of 5.8 million barrels, according to strategists at Macquarie. Late Tuesday, the American Petroleum Institute reported a crude inventory fell 5.9 million barrels, according to a source citing the data.
The EIA also reported weekly supply gains of 3.3 million barrels for gasoline and 400,000 barrels for distillates. Strategists at Macquarie forecasted inventories draws of 1.3 million barrels for gasoline and 100,000 barrels for gasoline.
U.S. oil production was up by 292,000 barrels at 13.493 million barrels per day in the latest week, the EIA said, while crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 1 million barrels to 24.1 million barrels. Demand for gasoline rose, with total motor gasoline supplied, a proxy for demand, at 8.506 million barrels per day in the latest week, from 8.419 million bpd from a week earlier.
Separately, the EIA will report its weekly data on U.S. natural-gas supplies at 12 noon Eastern, a day ahead of usual because of Thursday's Thanksgiving holiday.
Read: Thanksgiving travelers can be grateful for the lowest gas prices since 2021
-Myra P. Saefong -William Watts
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November 27, 2024 11:00 ET (16:00 GMT)
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