Oil prices end mixed as attention turns to OPEC+ decision on crude production

INA-  SOURCES

EIA reports a smaller-than-expected fall in U.S. crude inventories, rise in fuel stocks

Oil futures seesawed between modest gains and losses Wednesday, prompting U.S. and global benchmark crude prices to settle on a mixed note, with a cease-fire between Israel and Iran-backed Hezbollah eliminating much of the remaining risk premium around a wider Middle Eastern conflict.

With that backdrop, traders were turning their attention to a weekend meeting of the Organization of the Petroleum Exporting Countries and its allies. Official U.S. inventory data also revealed a weekly fall in domestic crude inventories, which was less than expected.

Price moves

-- West Texas Intermediate crude CL00 for January delivery CL.1 CLF25 declined by 5 cents, or nearly 0.1%, to settle at $68.72 a barrel on the New York Mercantile Exchange.

-- January Brent crude BRNF25, the global benchmark, added 2 cents, or less than 0.1%, to $72.83 a barrel on ICE Futures Europe. The more actively traded February contract BRN00 BRNG26 fell 2 cents, or less than 0.1%, to $72.30 a barrel.

-- December gasoline RBZ24 edged down by 0.9% to $1.97 a gallon, while December heating oil HOZ24 shed 1.6% to $2.20 a gallon.

-- Natural gas for January delivery NGF25 settled at $3.20 per million British thermal units, down 7.6% in the wake of last week's rally.

Market drivers

The cease-fire agreement in Lebanon, which "reduces tensions in the Middle East, acts as a stabilizing factor" for oil, said Rania Gule, senior market analyst at XS.com. However, this event will likely have a "limited long-term impact, as markets remain highly sensitive to any potential escalation in the region."

Oil prices ended little changed Wednesday after back-to-back losses that came in response to reports of an Israel-Hezbollah cease-fire deal was in the works. On Tuesday, Israel approved a U.S.-brokered cease-fire agreement with Lebanon's Hezbollah, according to the Associated Press, easing concerns - at least for now - over what was once a source of geopolitical tension. Crude had rallied last week as tensions between the West and Moscow intensified over the Ukraine-Russia war.

U.S. trading volume Wednesday was lower than usual ahead of Thursday's Thanksgiving Day holiday.

Attention now has turned to a Sunday meeting of OPEC+ ministers. In early November, OPEC+ said it would extend 2.2 million barrels a day of voluntary production cuts to the end of December. That meant it would delay a gradual increase in output that had been expected to start in the final month of this year.

Read: Trump's oil-drilling plans may pose a big problem for OPEC+

The modest oil-price gain "underscores an immediate response to reports that OPEC+ members are engaged in discussions to extend production cuts," Gule said in market commentary. "Should these measures be confirmed, they will undoubtedly support prices in the coming period, signaling a positive trend toward restoring balance in an otherwise volatile market."

Calls by President-elect Donald Trump and proposed cabinet members to significantly boost U.S. crude production pose a potential threat to OPEC+ market share, though skeptics question how quickly or how much U.S. producers are likely to increase output.

"If OPEC+ doesn't return barrels to market now and try to recapture market share from producers in the Western Hemisphere, including the U.S., Canada, Brazil, and Guyana, then when will they make their move?" said Robert Yawger, executive director for energy futures at Mizuho Securities, in a note.

Supply data

Also on Wednesday, the Energy Information Administration reported that U.S. commercial crude inventories fell by a smaller-than-expected 1.8 million barrels for the week ended Nov. 22.

The report was expected to show a decline of 5.8 million barrels, according to strategists at Macquarie. Late Tuesday, the American Petroleum Institute reported that crude inventory fell 5.9 million barrels, according to a source citing the data.

The EIA also reported weekly supply gains of 3.3 million barrels for gasoline and 400,000 barrels for distillates. Strategists at Macquarie expected inventories draws of 1.3 million barrels for gasoline and 100,000 barrels for gasoline.

U.S. oil production was up by 292,000 barrels at 13.493 million barrels per day in the latest week, the EIA said, while crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 1 million barrels to 24.1 million barrels. Demand for gasoline rose, with total motor gasoline supplied, a proxy for demand, at 8.506 million barrels per day in the latest week, from 8.419 million bpd from a week earlier.

Separately, the EIA reported Wednesday that U.S. supplies of natural gas declined by 2 billion cubic feet for the week ended Nov. 22. That matched the estimate of analysts surveyed by The Wall Street Journal. Data were released a day earlier than usual due to Thursday's holiday.





SOURCE: morning star