Oil edged higher on Wednesday as investors turned cautious ahead of a crucial OPEC+ meeting to decide output policy in the coming months, while a supply disruption caused by a storm in the Black Sea provided a lift for prices.
Brent crude futures climbed 3 cents to $81.71 a barrel at 0625 GMT. US West Texas Intermediate (WTI) crude futures gained 17 cents, or 0.2 per cent, at $76.58 a barrel.
Both benchmarks gained about 2 per cent on Tuesday on the possibility the Organization of the Petroleum Exporting Countries and allies such as Russia (OPEC+), will extend or deepen supply cuts, as well as concerns over Kazakh oil output and a weaker US dollar.
“Investors covered short positions ahead of the OPEC+ meeting amid worries over supply disruption from Kazakhstan,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
“All eyes are on OPEC+ policy and demand outlook toward the end of this year, but WTI is expected to hover around $76, with a range of $5 each above and below, for a while unless OPEC+ significantly expands production cuts,” he said.
OPEC+ is due to hold an online ministerial meeting on Thursday to discuss 2024 production targets, after delaying the meeting from Nov. 26.
The talks will be difficult and a rollover of the previous agreement is possible rather than deeper production cuts, four OPEC+ sources said.
“If they (OPEC+) fail to come to a preliminary deal, we cannot rule out the risk that the meeting is further delayed, which would likely put some downward pressure on oil prices,” said Warren Patterson and Ewa Manthey, analysts from ING bank, in a note to clients.
“The outlook for the oil market in 2024 will largely depend on OPEC+ policy.”
The premium on front-month loading Brent contracts over ones loading in six months climbed to a two-week high, suggesting a build up of concerns about supply deficits in the long-term.
A severe storm in the Black Sea region has disrupted up to 2 million barrels per day (bpd) of oil exports from Kazakhstan and Russia, according to state’s officials and port agent data, fuelling concerns of short-term supply tightness.
Kazakhstan’s largest oilfields are cutting combined daily oil output by 56 per cent from Nov. 27, the Kazakh energy ministry said.
Oil also found support from the dollar’s weakness and a drop in US crude inventories.
The dollar languished near a three-month trough against its major peers on Wednesday as expectations mount the Federal Reserve could begin lowering rates by early next year.
A weaker dollar typically supports oil prices as it makes oil cheaper for those holding other currencies.
Meanwhile, US crude oil inventories fell by 817,000 barrels last week, according to market sources citing American Petroleum Institute figures.
Eight analysts polled by Reuters estimated on average that crude inventories fell by about 900,000 barrels in the week to Nov. 24. Weekly US government data on stockpiles is due on Wednesday.