Oil futures Wednesday closed higher, extending a move around the highest level since early March, as uncertainty over whether a meeting of crude producers will be held this week or next raised doubts about a willingness to substantially extend global production cuts that taper after June.
Weekly declines in U.S. crude stockpiles and supplies at the Cushing, Okla. storage hub reported by the Energy Information Administration on Wednesday offered little support to oil prices, as petroleum product inventories climbed.
West Texas Intermediate crude for July delivery /zigman2/quotes/211629951/delayed CL.1 -0.24% tacked on 48 cents, or 1.3%, to settle at $37.29 a barrel on the New York Mercantile Exchange after surging 3.9% on Tuesday.
Global benchmark Brent saw its August contract rise 22 cents, or 0.6%, to end at $39.79 a barrel on the ICE Futures Europe, after gaining 3.3% in the prior session.
Prices for WTI and Brent crude marked their highest since March 6, according to Dow Jones Market Data.
Amena Bakr, deputy bureau chief at Energy Intelligence, reported that a June 4 meeting of the Organization of the Petroleum Exporting Countries and its allies appeared “unlikely,” via Twitter on Wednesday .
She said in a separate tweets that setting the date of next meeting is “contingent on all members of the group sticking to their quotas.” Member states that haven’t achieved their quotas in May will be asked to make up for that in the coming months, Bakr wrote, citing OPEC sources.
OPEC and, notably, major producer Russia, part of a group known as OPEC+, is expected to extend an agreement struck in April for cuts of 9.7 million barrels a day from May through the end of June.
Reuters reported Wednesday that Saudi Arabia and Russia have reached a preliminary agreement to extend existing cuts by one month. The reductions had been set to taper down to 7.7 million barrels starting in July.
Bloomberg News, meanwhile, also reported that Russia and several other producers favor extending the group’s current cuts by one month, citing people familiar with the matter. The report said major producers are cognizant that rising prices of crude benefit U.S. shale production, which is likely to come back on line as futures react to efforts by OPEC+ to stabilize the commodity’s value.
U.S. crude inventories, meanwhile, fell in the latest week.
The Energy Information Administration reported Wednesday that U.S. crude inventories edged down by 2.1 million barrels for the week ended May 29. That compared with a forecast by analysts polled by S&P Global Platts for an average climb of 3.5 million barrels. The American Petroleum Institute on Tuesday reported a fall of 483,000 barrels, according to sources.
A drop in imports led to the fall in crude inventories, as well as an increase in refinery runs and a 4 million-barrel shift of oil from commercial inventories into the Strategic Petroleum Reserve, said Matt Smith, director of commodity research at ClipperData. “Without this transfer, oil inventories would have reached a record high,” he told MarketWatch.
The EIA data also showed crude stocks at the Cushing delivery hub declined by about 1.8 million barrels for the week.
Gasoline supply, however, rose by 2.8 million barrels, while distillate stockpiles added 9.9 million barrels, the EIA reported. The S&P Global Platts survey had shown expectations for a supply decline of 300,000 barrels for gasoline, while distillate stocks were forecast at 2.8 million barrels higher.
“As product demand remains subdued, gasoline inventories showed a solid build, while distillates showed a mammoth one — despite refinery runs being over 3.6 million barrels per day below year-ago levels,” said Smith.
On Nymex, July gasoline rose 0.09% to $1.1193 a gallon and July heating oil lost 2.5% to $1.0646 a gallon.
Oil prices are at risk to move even lower if protests in the U.S. sparked by the death of George Floyd in police custody “get worse” or more COVID-19 cases suddenly appear, said Tariq Zahir, managing member at Tyche Capital Advisors.
The situation with China, regarding Hong Kong, could also impact crude oil if further sanctions happen or if the trade deal with the U.S. gets terminated, he said. “Several market movers will appear in the short term, and any one of [them] could have the next path of direction higher or lower” for oil.
Meanwhile, July natural gas settled at $1.821 per million British thermal units, up 2.5%.
“With the significant pullback in U.S. shale and onshore production, hurricanes will have a more substantial impact on oil and natural gas prices because we are going to feel Gulf of Mexico production shut-ins more acutely,” said Phil Flynn, senior market analyst at The Price Futures Group, in a note.
The National Hurricane Center is tracking Tropical Storm Cristobal, which may move further into the Gulf of Mexico later this week, potentially threatening energy production in the region.