Oil prices extend gains on OPEC+ cut bets, more supply disruptions

Investing.com-- Oil prices rose in Asian trade on Wednesday, extending gains from the prior session as traders bet on more production cuts being announced at an OPEC+ meeting this week. 

A weaker dollar, following less hawkish comments from Federal Reserve officials, also aided oil markets, as did supply disruptions in Russian and Kazakh oil exports due to a storm in the Black Sea. 

The storm disrupted exports by up to 2 million barrels per day, and also saw Kazakhstan’s three biggest oil fields cut output by 56%. 

The disruptions came just days before a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), where the cartel is widely expected to extend or even deepen its ongoing supply curbs. Any more production cuts are expected to further tighten oil markets going into 2024.

Brent oil futures expiring January rose 0.3% to $81.90 a barrel, while West Texas Intermediate crude futures rose 0.4% to $76.70 a barrel by 20:38 ET (01:38 GMT). 

But further gains in crude were held back by anticipation of more key economic readings this week, particularly from the U.S. and China. PCE price index data- the Fed’s preferred inflation gauge- is due later in the week, as is purchasing managers index data from China, the world’s biggest crude importer. 

OPEC+ meeting in focus as media reports suggest more cuts

Markets were now focused squarely on an OPEC+ meeting this Thursday. A string of media reports over the past week suggested that the cartel was targeting more production curbs to help offset recent weakness in oil prices.

A delay in the meeting- to Nov. 30 from Nov. 26, had cast some doubts over the scope of the planned supply cuts, especially as the delay appeared to be caused by disagreements with African producers over the planned cuts. 

But Saudi Arabia and Russia are widely expected to lead the cartel in further trimming production. The two countries had cut supply steadily over the past year to support crude prices, and are expected to extend their ongoing cuts into 2024. 

Recent increases in U.S. production, rising Chinese inventories and growing concerns over a demand slowdown saw oil markets turn less tight in recent months than initially expected. 

US inventories shrink by smaller-than-expected margin- API

Also curbing gains in oil prices was data from the American Petroleum Institute (API), which showed that U.S. crude inventories shrank by a smaller-than-expected margin in the week to Nov. 24. 

Crude inventories shrank 0.8 million barrels in the past week, missing expectations for a drop of 2 million barrels, the API data showed.  The reading usually heralds a similar trend from official inventory data, which is due later on Wednesday.

The smaller-than-expected draw in inventories also comes after a bumper, 8.7 million build in the week before. U.S. inventories saw four straight weeks of builds as fuel demand appeared to be cooling with the winter season. 

Concerns over less tight markets and a dulled outlook for the global economy saw oil prices nursing steep losses for November. Brent and WTI futures were down between 4.4% and 5.5% for the month, following a steep loss in October.