Crude oil found a breather after the successive decline over the downbeat data released by the American Petroleum Institute on Tuesday. The gain was supported by the optimistic expectations of the market participants toward the upcoming OPEC meeting later today in Algiers.
During the morning session, crude oil advanced 0.07 percent to trade at $44.71 after sinking for almost 1 percent. Brent oil for December delivery added 0.17 percent to $46.60 while natural gas lost 0.46 percent to end at $3.030. Apparently, the strong demand for crude and refined products changed the direction of the commodity.
Oil Inventories’ Fifth Draw
For five consecutive weeks, the U.S. oil inventories have been plummeting despite increased of output by Libya and Nigeria. The American Petroleum Institute showed that the crude oil inventories dropped to 752,000 barrels while distillates lost 343 barrels. In the week ended in September 23, gasoline declined to 3.7 million barrels and inventories at Cushing moved down 832,000 barrels.
Investors are looking forward as well at the upcoming report of the Energy Information Administration to be released later today. After the draw of the oil inventories, most of the analysts see the huge possibility of a four straight week skid of the stocks. Amid the glut supply concerns, the industry data could somehow lift the mood of the market players.
OPEC Meeting
Meanwhile, the Organization of the Petroleum Exporting Countries is scheduled to have its meeting in Algiers later in the day. Oil analysts have a high expectation on the outcome of the talk; aside from the firm cooperation of the concerned parties, a certain plan to cure the flooded oil market is on the table.
However, critics do not see any chance that the organization can still address the glut which has lasted for almost two years already. Prior to the meeting, Iranian Oil Minister Bijan Zanganeh expressed the need of adequate time before reaching an agreement. Also, Saudi Arabia Oil Minister Khalid al-Falih voiced out the need for a gentle adjustment to reassure the market.
Glut Supply
Amid the flooded market, major oil producers keep on pumping, headed by Iran after the sanction was lifted. Nigeria and Libya are also planning to heighten their respective productions after suffering from disruptions over the emergence of conflict. In connection with this, India will increase the purchase of crude oil from Nigeria after India's Vice President Hamid Ansari had a talk with Nigerian President Muhammadu Buhari.
Based on the recent outcome of the OPEC meeting, there’s a little chance that the these major oil kingpins would finally agree to freeze output. However, they could find a more stable and realistic solution to the existing glut supply.
Iraq Oil Minister Jabbar Al-Luiebi is optimistic towards the result of the meeting. The oil minister confirmed Baghdad may agree with the output freeze as long as it can have a positive impact on prices. On the other hand, some believe that the recovery was due to the industry data while Grace Liu, the head of research at Guotai Junan International shared that the meeting will not change the fundamental of the market but it’s about the attitude of the producers instead.