Wednesday brings news on potentially more OPEC-driven oil output cuts and US crude oil prices moving up.
Potentially More Cuts
Crude oil prices dipped during the Asian session on Wednesday due to traders doubting that Russia and OPEC will reach an agreement on extending the crude output cut deal, which the market has already priced in after an unexpected jump in US crude oil inventories.
WTI crude started on Wednesday at $57.70 per barrel (open) in Europe, 30 cents or 0.5% down, below their last settlement ahead of the crude oil inventories data due later in the day.
A report issued by the American Petroleum Institute (API) late on Tuesday weighed down on the WTI, which showed a surprising surge in US crude inventories of 1.8 million during the week ending November 24. Having said that, last week, US crude hit 457.3 million barrels.
WTI was also pushed down by the restart on the Keystone pipeline on Tuesday, which supplies the US with Canadian crude.
Ahead of big data, the international benchmark for oil prices Brent crude opened at $62.95 per barrel, lower by 44 cents or 0.7%.
In 2017, oil prices saw a broad-based lift, with the Brent going up by 40% since mid-2017 due to OPEC supported by a group of oil-exporting countries under Russia’s leadership making sustained efforts to withhold 1.8 million barrels per day (bpd) of output.
The deal expires in March 2018. OPEC meet on November 29 to discuss the possibility of extending the deal to the end of 2018.
BMI Research analysts suggest that the oil output cut extension is likely as it has already been priced in by the market. OPEC and Russia are expected to extend their supply cuts for the whole of next year. Yet, there is a great likelihood that the deal will be be revisited in June 2018 as Moscow expressed its concern regarding a potential market overheating.
Opinions are diverging, with some favouring an extension of the oil output cut to help maintain the balance of the oil markets and oil-producing economies in green, while others believe that an extension of the output cuts is not necessary as the markets hardly seem to rebalance.