Oil futures shake off early losses Tuesday to log their first gain in four session, lifting U.S. benchmark prices to their highest finish in almost seven weeks.
Prices popped just ahead of the expiration of the November West Texas Intermediate crude contract at the conclusion of Tuesday’s trading session, and also found support on expectations for a weekly decline in U.S. crude stockpiles, Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
The American Petroleum Institute will release its weekly figures on U.S. oil supplies late Tuesday, with the Energy Information Administration’s official data due out Wednesday.
On average, analysts polled by S&P Global Platts expect the EIA to report a fall of 1.9 million barrels in domestic crude supplies. That would mark a second-straight weekly inventory decline. The analysts also forecast supply declines of 1.6 million barrels for gasoline and 3 million barrels for distillates.
On Wednesday, the most-active West Texas Intermediate crude for December delivery CLZ20, +1.12% CL00, +1.12%, which now also the front month, rose 64 cents, or 1.6%, to settle at $41.70 a barrel on the New York Mercantile Exchange. The November WTI contract CLX20, +1.66% CL.1, +1.66%, which expired at the day’s settlement, added 63 cents, or 1.5%, to end at $41.46 a barrel.
The global benchmark, December Brent crude BRN00, -0.44% settled at $43.16 a barrel, up 54 cents, or 1.3%, on ICE Futures Europe.
Oil futures had spent part of the session moving lower, amid continued concerns that a surge in COVID-19 cases in Europe and the U.S. will limit energy demand .
Several European countries have imposed new restrictions on business activity and travel as COVID-19 cases have risen in recent days. In the U.S., the seven-day moving average of new cases, which smooths out daily irregularities, rose to 56,007, its highest since Aug. 5, according to The Wall Street Journal.
Meanwhile, a virtual committee meeting of the Organization of the Petroleum Exporting Countries and their allies on Monday “did little to calm concerns over waning demand and plentiful supply, as Russia and Saudi Arabia avoided giving any indication they would reconsider the planned output increase in January,” said Fiona Cincotta, market analyst at GAIN Capital, in a Tuesday note.
The current OPEC+ agreement calls for output cuts of 7.7 million barrels a day through December, which will then taper to 5.8 million barrels a day starting in January.
On Tuesday, the Joint Ministerial Monitoring Committee reiterated their commitment to the output-cut agreement and said it “encouraged” participating countries to increase efforts to compensate for “overproduced volumes” to rebalance the market.
“With the committee urging members to remain ‘vigilant and proactive,’ statements from oil ministers suggested no decision on January’s planned output increase were made, with the focus instead remaining for now on enforcing the agreed upon compensatory cuts to ensure overall compliance with the existing deal,” wrote analysts at JBC Energy, a Vienna-based consulting firm, in a note.
“With Libyan supply ramping up, keeping a lid on overall OPEC supply is likely to continue to be a headache for the organization in the months ahead,” they said. “By the time of the next JMMC meeting, scheduled for mid-November, some tough decisions may need to be made. ”
Libya this month resumed operations at its largest oil field.
Still, Russia appears more open to the possibility of extending output cuts if the market doesn’t improve, said Flynn. In regard to the future of OPEC+ output cuts, Russian Energy Minister Alexander Novak told Bloomberg on Tuesday: “We will have a look in a month and come up with our position.”
Back on Nymex, other energy futures ended higher, with November gasoline RBX20, +1.77% up 2.2% at $1.1879 a gallon and November heating oil HOX20, +1.03% rising 1.3% at $1.1735 a gallon.
November natural gas NGX20, +2.97% tacked on 4.2% to $2.913 per million British thermal units.
Natural-gas prices got a boost amid forecasts for colder temperatures across most of the U.S., said Christin Redmond, commodity analyst at Schneider Electric.
The market also expects to see a “below-normal storage injection” from the EIA, when it releases data Thursday on natural-gas supplies in storage, she said in a daily report.
Some offshore Gulf of Mexico production remained shut-in through the middle of last week from Hurricane Delta earlier this month, “while demand was relatively strong, it is likely that less gas was sent into storage facilities compared to historical norms,” said Redmond.
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