Oil Rises on Debate of Deeper OPEC Cuts as Another Crude Build Looms

22/10/2019 17:30:19 Commodities

Crude prices snapped two-straight days of losses after investors ignored another weekly inventory rise forecast by analysts to focus on report that OPEC might consider deeper supply cuts when it meets in December.

The likelihood of OPEC and its key ally Russia debating cuts beyond the 1.2 million barrels per day they had agreed to since December 2018 has never been a question. Yet both the U.S. West Texas intermediate and U.K. Brent crude benchmarks rose by more than 1% each on Tuesday as the speculation made its rounds again.

“I can’t recall the number of times we’ve read that OPEC might deepen cuts when it meets in December,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “Yet, here’s the market going up again on that, when it should be neutral at least based on another crude build we most likely had last week.”

WTI was up 66 cents, or 1.2%, at $57.14 per barrel by 1:25 PM ET (17:25 GMT).

Brent rose 43 cents, or 0.7%, to $59.39.

Saudi Arabia and some Gulf oil producers in OPEC have been delivering more than their share of promised cuts and now want members such as Nigeria and Iraq, as well as top ally Russia, to contribute more, Reuters reported.

Russia, the world’s second-largest oil producer, said on Sunday it did not meet its supply reduction commitment in September because of an increase in natural gas condensate output as the country prepared for winter. There is no certainty that Moscow wants to do more in 2020 either.

The OPEC-cuts speculation papered over market expectations of inventory data for U.S. crude and fuels due between later Tuesday and Wednesday.

Analysts expect the U.S. government’s Energy Information Administration to report a crude build of 2.5 million barrels for last week, extending inventory rises for a sixth week.

Ahead of the EIA, however, the American Petroleum Institute will report its own supply-demand snapshot for last week at 4:30 PM ET. API’s numbers can contrast sharply with those of EIA.