Oil prices edged up Wednesday, supported by potential production caps by OPEC in November and ahead of a possible decline in U.S. stock levels.
The November contract for global crude benchmark Brent was up 0.78% at $46.33 while its U.S. counterpart West Texas Intermediate gained 0.58% to hit $44.94.
The likelihood of an agreement on production cuts or a freeze being reached between members of the Organization of the Petroleum Exporting Countries when they sit down in Algiers on Wednesday has faded, but hopes have risen that an agreement can be reached at an official meeting in November. Increased optimism around the cartel came after Saudi Arabia offered to trim production by 500,000 barrels a day.
Some analysts remain skeptical, however.
Germany’s Commerzbank said in a note that current output from OPEC is already high enough to mean that the global surplus of crude wouldn’t fall as forecast in 2017. It added that any additional production from individual members would further exacerbate the issue.
“It is easy to forget that Nigeria and Libya also want to be allowed to step up their output, which is likely to account for over 1 million barrels a day,” the note said.
Saudi Oil Minister Khalid al-Falih at the 15th International Energy Forum in Algiers on Tuesday. ENLARGE
Saudi Oil Minister Khalid al-Falih at the 15th International Energy Forum in Algiers on Tuesday. PHOTO: ZUMA PRESS
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Other analysts believe Saudi Arabia’s offer to trim production by 500,000 barrels a day would be woefully inadequate, with Olivier Jakob from Switzerland-based Petromatrix going as far to brand the offer a “trick.”
“A meaningful OPEC deal requires Saudi Arabia to cut by at least 1 million barrels a day and not just by its usual summer-to-winter seasonal variation, but we see no signs that this is about to happen,” Mr. Jakob said in a note.
Traders are also awaiting the weekly U.S. inventory data due later Wednesday. Analysts surveyed by The Wall Street Journal expect the Energy Information Administration to report domestic crude stockpiles rose last week.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week ended Sept. 23 showed a 752,000-barrel drop in crude supplies, a 3.7-million-barrel decrease in gasoline stocks and a 343,000-barrel decline in distillate inventories, according to a market participant.
Nymex reformulated gasoline blendstock for October—the benchmark gasoline contract—rose 137 points to $1.4074 a gallon, while October diesel traded at $1.4125, 26 points higher.
ICE gasoil for October changed hands at $413.50 a metric ton, up $3.50 from Tuesday’s settlement.