Oil strengthens on prospect of OPEC+ maintaining supply cuts, drop in US inventories

SINGAPORE: Oil prices rose for a second straight session on Thursday, as the possibility that OPEC+ producers might decide against increasing output at a key meeting later in the day lent support, alongside a drop in US fuel inventories.

Brent crude futures added 61 cents, or 1%, to $64.68 a barrel, as of 0428 GMT, after climbing more than 2% on Wednesday. US West Texas Intermediate (WTI) crude futures gained 28 cents, or 0.5% to $61.56 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, are considering rolling over production cuts into April instead of raising output, as a recovery in oil demand remains fragile due to the coronavirus crisis, three OPEC+ sources told Reuters.

The market had been expecting OPEC+ to ease production cuts by around 500,000 barrels per day (bpd) from April.

"OPEC+ is currently meeting to discuss its current supply agreement. This raised the spectre of a rollover in supply cuts, which also buoyed the market," ANZ said in a report.

US crude oil stockpiles surged by a record of more than 21 million barrels last week as refining plunged to an all-time low due to the Texas freeze that knocked out power for millions.

With refiners unable to process crude, gasoline and distillate inventories also dropped dramatically, especially in the Gulf Coast region where their declines set records, the US Energy Information Administration said on Wednesday.

"Prices hinge on Russia's and Saudi Arabia's preference to add more crude oil production," said Stephen Innes, global market strategist at Axi.

"Perhaps more interesting is the lack of US shale (production) response to the higher crude oil prices, which is favourable for higher prices."