(Bloomberg) — Oil edged up after a surprise decline in U.S. crude inventories and signs of stronger demand injected optimism into a market awaiting a key decision from the OPEC+ alliance on production.
Futures in New York rose as much as 1% after flipping between gains and losses earlier in Wednesday’s session. Domestic crude supplies dropped for the first time in six weeks, according to an Energy Information Administration report. Gasoline inventories tumbled to the lowest since November and a gauge of fuel demand climbed further above 8 million barrels a day to the highest in nearly seven months.
“The demand numbers were huge and we continue to see improvements there,” said Matt Sallee, portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. “It’s pretty consensus to think that gasoline will be strong and jet fuel will be the laggard,” but there’s been positive signs “even on the jet fuel side.”
Investors remains laser-focused on the OPEC+ alliance’s meetings on production policy this week, with many expecting the group to avoid easing output curbs. In the run-up to Thursday’s ministerial talks, a producer panel revised down consumption estimates for the year. Still, the alliance expects the surplus built up during the pandemic to be mostly gone within the next quarter.
Figures from the EIA report paint the U.S. as a bright spot in the demand recovery. U.S. refineries are getting back to work after a spate of outages caused by February’s deep freeze, processing crude at the highest rate in a year. Yet, in other parts of the world, consumption remains spotty. In Europe, France is leaning toward a national lockdown, further signaling how the pandemic is preventing a full-fledged demand rebound.
The Organization of Petroleum Exporting Countries and its allies will debate whether to revive part of the 8 million barrels of daily output — about 8% of global supply — they’re withholding. After surprising traders at the last session by not easing curbs, the group is now expected to maintain that position.
“The balance of risks suggests OPEC will steer toward the cautious outcome, delivering sharp deficits and continue to tighten energy markets at a fast clip,” TD Securities commodity strategists led by Bart Melek said in a note.
At the same time, Saudi Aramco, the state-owned oil giant, is expected to raise its Arab Light official selling price for May supplies by 30 cents a barrel, according to the median estimate in a Bloomberg survey of refiners and traders. That’s despite continued flows of Iranian crude into China, and challenging conditions for many Asian refiners.
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