Oil rose for a third day after industry data pointed to a substantial draw in US crude stockpiles and investors counted down to an OPEC+ meeting that may see the group agree to cut production.
West Texas Intermediate climbed toward $79 a barrel after adding 2.5% over the previous two sessions. The industry-funded American Petroleum Institute reported inventories fell by almost 8 million barrels last week, according to people familiar with the figures. Official data follow later on Wednesday.
The Organisation of Petroleum Exporting Countries and allies including Russia will meet virtually on December 4, and there’s speculation the alliance will agree again to reduce supply to counter market weakness. The gathering comes the day before a deadline for European Union sanctions on Russian crude flows, although a related price cap has yet to be finalised.
Crude has retreated about 9% this month on concern that a global economic slowdown will sap energy demand, with widely watched market metrics signaling ample near-term supply. Traders are also tracking events in virus-hit China as Beijing pushes for more vaccinations among seniors, a move seen as crucial for an eventual reopening and one that follows a wave of protests.
“While we could see a positive reaction on any indications of further supply curbs from the bloc, it may take much more to convince markets of a sustained trend reversal to the upside,” said Yeap Jun Rong, market strategist at IG Asia Pte. “The demand outlook will play a significant role.”
Data from China on Wednesday highlighted the challenges, with figures showing factory and services activity contracted further in November as a record number of Covid cases prompted widespread movement curbs.
Key time spreads are signaling abundant near-term supply, with Brent and WTI’s prompt spreads — the gap between the nearest two contracts — in a bearish contango pattern. The figure for Brent was $1.11 a barrel in contango, compared with 66 cents in the opposite backwardated structure last week.
EU diplomats have been seeking a compromise on the level of the US-led cap, which is among moves to punish Moscow for the war of Ukraine by curbing revenue while keeping the nation’s crude flows going. US energy security adviser Amos Hochstein said the plan needs to strike a “delicate balance.”
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