Oil prices steady at 5-month highs, OPEC meeting awaited

Investing.com-- Oil prices rose slightly in Asian trade on Wednesday, sticking to five-month highs as signs of shrinking U.S. inventories and more potential supply disruptions in Russia presented a tighter outlook for global crude markets. 

Focus was now largely on a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) due later in the day, although the producer group is widely expected to keep production unchanged. 

Fears of a broader conflict in the Middle East- after Iran vowed retaliation against Israel for strikes on the Iranian embassy compound in Damascus- presented the possibility of more supply disruptions in the Middle East, helping oil surge to levels last seen in late-October. 

Brent oil futures expiring in June rose 0.2% to $89.13 a barrel, while West Texas Intermediate crude futures rose 0.2% to $84.42 a barrel by 20:19 ET (00:19 GMT). 

Expectations of tighter supplies helped oil prices rise past a stronger dollar and growing uncertainty over the path of U.S. interest rates. But these factors also limited broader gains in crude. 

Oil prices had risen earlier this week after Mexico said it will also cut its oil exports. 

US oil inventories seen shrinking- API 

Data from the American Petroleum Institute showed on Tuesday that U.S. crude inventories shrank nearly 2.3 million barrels in the week to March 28- more than expectations for a draw of 2 million barrels.

While the reading comes after an outsized, 9.3 million barrel build in the prior week, it is also the third weekly draw in inventories over the past four weeks. 

These draws pushed up expectations that U.S. oil markets  were tightening, especially amid increased exports to fill the supply gap left by Russia and the OPEC. 

Demand in the world’s largest fuel consumer was also seen picking up with the spring and summer seasons. The API data heralds a similar trend in official inventory data due later on Wednesday.

OPEC set to keep production unchanged

The OPEC+ is widely expected to keep production unchanged during a ministerial panel meeting later on Wednesday. 

The cartel had recently said it will maintain its current pace of production cuts until at least end-June, singaling that markets had sufficiently tightened through late-2023 and early 2024. 

Russia refinery disruptions, Middle East conflict buoy crude 

Ukraine attacked Russia’s third-largest oil refinery earlier this week, although Reuters reports said the attack did not cause critical damage.

But the strike comes in the wake of several such attacks against Russia’s energy infrastructure- a trend that could potentially further stymie oil exports from Moscow. 

In the Middle East, the prospect of Iran directly joining the Israel-Hamas war also rattled markets, after Tehran vowed retaliation for a strike against its embassy in Damascus, for which it blamed Israel.