U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply higher on speculation that OPEC and its allies will agree to make deeper production cuts when they meet on December 5-6. Prices are also being underpinned by a private industry report that showed a larger than expected drop in U.S. crude oil stockpiles.
Also boosting prices is positive trade talk news. Bloomberg reported Wednesday, citing unnamed sources familiar with the talks, that the U.S. and China were moving closer to securing an agreement on the amount of tariffs that would be rolled back in a so-called “phase one” trade deal.
OPEC members meet on Thursday, with the OPEC+ group meeting the following day. OPEC+ has been curbing supply since 2017 and is expected to keep the cuts in place to balance out record production in the United States.
Traders are expecting OPEC+ to approve deeper crude output cuts. Iraqi oil minister Thamer Ghadhban told reporters in Vienna on Tuesday that “a deeper cut is being preferred by a number of key members.”
American Petroleum Institute Weekly Storage Report
The API reported a crude oil inventory draw of 3.72 million barrels for the week-ending November 28. Traders were looking for a 1.798 million-barrel draw in inventory, the biggest draw since September.
The API also reported a build of 2.93 million barrels of gasoline versus a forecast of a build in gasoline inventories of 1.693 million barrels. Distillate inventories saw a build of 794,000 barrels for the week, while Cushing inventories fell by 251,000 barrels.
Trade Deal Hopes Underpinning Crude Oil
Helping to support crude oil prices is a report from Bloomberg saying the U.S. and China were moving closer to a trade deal.
Bloomberg is reporting that the U.S. and China are moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions over Hong Kong and Xinjiang, people familiar with the talks said.
WTI and Brent crude oil futures are extending their gains after the EIA reported a 4.9 million barrel draw down. This was larger than the 1.6 million barrel estimate.
If the upside momentum continues then look for WTI and Brent crude traders to take a run at last week’s highs at $58.74 and $63.57, respectively.
If gains are limited, it will be because of worries ahead of the OPEC meeting.
This article was originally posted on FX Empire
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