Oil prices rose on Wednesday following a sharp drop in U.S. crude inventories, with the market waiting for next steps from a meeting later in the day on the future level of output cuts by OPEC and its allies.
Brent crude futures were up 22 cents, or 0.5%, at $43.12 a barrel as of 0640 GMT, and U.S. West Texas Intermediate (WTI) crude futures rose 23 cents, or 0.6%, to $40.52 a barrel.
Reflecting a recovery in fuel demand despite the coronavirus pandemic, U.S. crude inventories fell by 8.3 million barrels in the week to July 10, beating analysts’ expectations for a decline of 2.1 million barrels, according to data from industry group the American Petroleum Institute.
Official numbers from the U.S. Department of Energy’s Energy Information Administration (EIA) are due on Wednesday.
“API numbers released overnight, have provided some support to the market in early morning trading today,” ING Economics said in a note.
On supply, the market will be closely watching for news from a meeting of the Joint Ministerial Monitoring Committee (JMMC) of the Organization of the Petroleum Exporting Countries (OPEC) later on Wednesday.
“The market will be eager to see if deeper cuts will be rolled over for an additional month, or whether the group will stick to the original plan, and start trimming cuts,” according to ING Economics.
“Most indications suggest that it will be the latter, with more focus on compliance and compensatory cuts.”
Key members of OPEC and allies including Russia, collectively known as OPEC+, are set to decide whether to extend output cuts of 9.7 million barrels per day (bpd) that end in July or ease them to 7.7 million bpd.
“Oil prices are likely to be traded in a range of $40, with the market paying close attention to today’s JMMC results,” said Kim Kwang-rae, commodity analyst at Samsung Securities in Seoul.
In June, OPEC and its allies delivered compliance of 107% with their agreed oil output cuts, an OPEC+ source said on Tuesday.
Meanwhile, OPEC said in its monthly report that global oil demand would soar by a record 7 million bpd in 2021 as the global economy recovers from the coronavirus pandemic although it would stay below 2019 levels.