By Barani Krishnan
Investing.com — Oil prices rose around 1% on Tuesday for their biggest jump in two weeks, as traders reacted to hints that the OPEC+ producer alliance could announce another production cut at its December meeting to deepen the 2 million barrels per day reduction put in place this month.
Expectations that U.S. crude inventories fell last week for a second straight week also boosted confidence in oil.
Even so, London-traded Brent crude traded well below this month’s high of nearly $100 a barrel, while New York’s West Texas Intermediate was down sharply from the high of $93 a barrel. November as China’s Covid rampage continued to dominate the headlines, raising fears that the capital Beijing may then be heading for full lockdown.
for January delivery was 91 cents, or 1.1%, at $80.95 a barrel. The benchmark U.S. crude hit a 10-month low below $76 on Monday.
settled 91 cents, or 1%, at $88.36. The global crude benchmark fell to a nine-month low below $83 in the previous session.
Crude prices appeared to have bottomed out on Monday after Saudi Energy Minister Abdulaziz bin Salman, who is in charge of OPEC+, denied a Wall Street Journal report that the 23-member coalition of oil producers The country was instead planning for a production increase that would be announced on December 4. .
Abdulaziz also said something else that had a bigger impact on the oil bulls: “If it is necessary to take further action by cutting production to balance supply and demand, we always remain ready. to intervene”.
In the OPEC+ speech, it was the clearest sign that another production cut could take place in December as the alliance aims to restore its pricing power in a market which had lost 20% of its value in the past two weeks.
Brent crude rose from a low of around $82 a barrel to nearly $100 a few days after OPEC+ announced the 2 million barrel per day cut in November. On Monday, however, Brent fell to $82.36 a barrel, its lowest level since February, before Abdulaziz’s remarks brought it all but back into positive territory with a settlement of $87.45.
WTI fell from around $76 a barrel to around $96 after the November production cut announced by OPEC+. On Monday, the U.S. crude benchmark hit $75.30, its lowest since January, before bouncing off Abdulaziz’s remarks to settle slightly lower on the day at $80.04.
“The recent drop in oil prices was overblown and given that global economic activity outside of China will not completely fall off a cliff, prices should continue to stabilize here,” said Ed Moya, an analyst at the platform. OANDA e-commerce.
But admittedly, the oil bulls and bears were in “a tug of war, with Chinese Covid demand concerns countered by what appears to be Saudi Arabia motivated to keep the oil market tight,” Moya added.
Covid control restrictions are now weighing on a fifth of China’s economy as infections continue their upward march, defying the central government’s call for more targeted and less disruptive Covid Zero measures, Bloomberg reported on Tuesday. It cited 27,307 new cases for Monday alone, just shy of the previous record high of 28,973 reached in April when the outbreak in Shanghai sparked a spike in infections.
“For China, moving away from ‘zero-Covid’ is easier said than done,” NBC said in another report. Beijing is facing its toughest Covid test yet after the Chinese capital saw the country’s first coronavirus deaths in six months, with infections continuing to soar, according to other reports. A complete lockdown in Beijing could have a disastrous impact on China’s economy, experts warn.
Market participants were also on the lookout for weekly U.S. oil inventory data, expected after market settlement by API or the American Petroleum Institute.
The API will publish around 4:30 p.m. ET (9:30 p.m. GMT) a snapshot of the US Crude, Gasoline and Distillates closing balances for the week ended November 18. The figures serve as a precursor to official inventory data on the same due Wednesday from the US Energy Information Administration.
For the past week, analysts tracked by Investing.com expect the EIA to report a drop of 1.06 million barrels, down from the 5.4 million barrel reduction reported in the week before the November 11th.
On the front, the consensus is for a smaller build of 383,000 barrels from the prior week’s 2.2 million barrel build.
With , we expect a drop of 550,000 barrels from the previous week’s gain of 1.12 million.