Oil prices finished higher Wednesday, buoyed by a weekly decline in U.S. crude production, as investors grow hopeful that major oil producers will agree to output cuts this week.
The Energy Information Administration reported a weekly decline of 600,000 barrels a day in domestic crude production on Wednesday from a near record level to 12.4 million barrels a day for the week ended April 3. It also reported, however, that U.S. crude supplies rose for an 11th straight week.
Still, the meeting Thursday with OPEC and outside nations, collectively known as OPEC+, to discuss a possible cut to global production “will be the determining factor [on] whether we see crude stabilize or go slightly higher from here or revisit the lows under $20,” said Tariq Zahir, managing member at Tyche Capital Advisors.
“Demand destruction by road and by air is astonishing and doesn’t look to get better in the near term” as efforts to stem the spread of COVID-19 continue to hamper travel, he told MarketWatch.
West Texas Intermediate crude for May delivery rose $1.46, or 6.2%, to settle at $25.09 a barrel.
It climbed by as much as 11.9% to touch a high of $26.45 near the end of the session. It didn’t trigger circuit breakers as the daily limit price move for WTI oil was lifted to 15% from 7% on March 19 .
The OPEC+ meeting will discuss a “massive output reduction, which may reach 10 million barrels a day,” Nayla Razzouk, Bloomberg News’ managing editor for the Middle East & North Africa Major tweeted on Wednesday , citing the state-run news agency of Algeria, which holds the presidency of OPEC.
On Tuesday, WTI dropped 9.4% on the New York Mercantile Exchange. June Brent crude rose 97 cents, or 3%, to $32.84 a barrel. The contract lost 3.6% on ICE Futures Europe Tuesday.
Oil producers are scheduled to hold a virtual meeting on Thursday, with media reports indicating Saudi Arabia and Russia were inching toward a deal to cut production and end a damaging price war that has flooded the world with crude supply and caused a storage shortage as major economies shut as governments tried to stop a fast-spreading COVID-19 pandemic.
There has also been speculation that the U.S. may cut production as well or U.S. companies may end up having to cut output anyway, amid low prices.
Data from the EIA Wednesday, meanwhile, showed that U.S. crude supplies rose by 15.2 million barrels last week. Analysts polled by S&P Global Platts expected the data to show a rise of 8.4 million barrels. The American Petroleum Institute on Tuesday reported a climb of 11.9 million barrels, according to sources.
“As refiners slash runs amid cratering product demand, oil inventories are filling quickly, despite domestic production estimates being slashed,” said Matt Smith, director of commodity research at ClipperData.
“Oil inventories are up over 6%, or 29 million barrels, in the last two weeks—that equates to over 2 million barrels a day,” he told MarketWatch.