Oil futures gained ground Wednesday as traders awaited news from major producers holding discussions in Algeria on potential limits on production levels.
A fourth-straight, unexpected weekly decline in U.S. crude inventories, also helped to pitch futures higher.
Members of the Organization of the Petroleum Exporting Countries and other big oil producers were holding discussions Wednesday on the sidelines of an energy forum in Algeria on ways to help stabilize the oil market.
OPEC may announce an agreement on an output freeze after the meeting, but it won’t offer full details until the official Nov. 30 cartel meeting in Vienna, Reuters said in a tweet Wednesday, citing sources.
BREAKING: OPEC may announce agreement on output freeze in Algiers, but no full detail until November - sources— Reuters Business (@ReutersBiz) September 28, 2016
November West Texas Intermediate crude CLX6, +2.71% added $1.07, or 2.4%, to $45.74 a barrel on the New York Mercantile Exchange trading new the session’s high of $45.89 after tapping a low of $44.45. The November contract for global crude benchmark Brent LCOX6, +3.13% was up $1.18, or 2.6%, to $47.15 a barrel on the ICE Futures exchange in London.
“It is more likely that a freeze or production limit would be put in place than a cut as countries like Iran, Libya, Nigeria, Venezuela all have plans to increase production,” said John Macaluso, an analyst at Tyche Capital Advisors. “Any type of limit or cap on production at near current levels would not help the global oversupply issue.”
But the meeting isn’t expected to result in any official agreement among producers an official from Saudi Arabia has said that the meeting is “consultative.” A decision isn’t expected to be made until OPEC’s next meeting in Vienna on Nov. 30.
Recent “comments [from] the Saudi Arabian and Iranian oil ministers indicate the ongoing stalemate,” said Matt Smith, director of commodity research at ClipperData.
But the Saudis have indicated that they are willing to have exemptions under a freeze agreement and it appears that Iran may be willing to freeze once it reaches production of 4 million barrels a day, he said. “Either way, no decision appears forthcoming before the next official OPEC meeting,” so it’s ‘a cast-iron case of kicking the can down the road.”
U.S. crude supply falls again
On Wednesday, the U.S. Energy Information Administration reported that domestic crude supplies fell unexpectedly for a fourth week in a row.
Crude inventories fell by 1.9 million barrels in the week ended Sept. 23. A 3.2 million-barrel climb was expected by analysts polled by S&P Global Platts, while the American Petroleum Institute late Tuesday reported a decline of 752,000 barrels.
Coming into the fourth quarter, Macaluso said he expected to see consecutive builds in crude supplies as refinery maintenance season begins.
“Following numerous large draw’s this month, the price of oil is a telling tail of how over supplied the market is with prices still trading in a tight range,” he said.
Gasoline supplies, meanwhile, rose by 2 million barrels, while distillate stockpiles were down 1.9 million barrels, according to the EIA.
On Nymex, October gasoline RBV6, +3.30% rose 3.2 cents, or 2.3%, to $1.426 a gallon and October heating oil HOV6, +3.27% added 4.4 cents, or 3.1%, to $1.454 a gallon.
October natural gas NGV16, -1.97% fell by 8.8 cents, or 2.9%, to $2.908 per million British thermal units, in volatile trading ahead of the contract’s expiration at Wednesday’s settlement.
The EIA report also showed that total U.S. crude production edged down by 15,000 barrels a day to 8.497 million barrels a day last week, after a modest increase in the previous week.