NEW YORK: West Texas Intermediate (WTI) crude oil futures pared gains on Wednesday after U.S. government data showed a bigger-than-expected weekly rise in gasoline and distillate inventories amid a new coronavirus variant triggering fresh travel restrictions that could dampen oil demand.
WTI was trading $2.4, or 3.6%, higher at $68.59 a barrel at 11:19 a.m. ET (1619 GMT), after paring some gains immediately after the weekly government stock data. They were up as much as 4% earlier in the session.
Global benchmark Brent crude was up $2.5, or 3.6%, at $71.75 a barrel.
Both contracts had earlier retraced some of their gains after an OPEC+ document showed the group forecasting a bigger oil surplus in the new year than previously thought.
U.S. gasoline stocks rose 4 million barrels last week to 215.4 million barrels, government data showed, compared with analysts’ expectations in a Reuters poll for 29,000-barrel rise. Distillate stockpiles increased 2.2 million barrels to 123.9 million barrels, versus expectations for a 462,000-barrel build.
Crude inventories fell 910,000 barrels in the week, data showed, compared with forecasts for a 1.2 million-barrel drop.
Both Brent and WTI front-month contracts in November posted their steepest monthly falls in percentage terms since March 2020, down 16% and 21% respectively.
Analysts at Goldman Sachs called the plunge in oil prices “excessive,” saying “the market has far overshot the likely impact of the latest variant on oil demand with the structural repricing higher due to the dramatic change in the oil supply reaction function still ahead of us.”
The Organization of the Petroleum Exporting Countries met on Wednesday ahead of a meeting on Thursday of OPEC+, which groups OPEC with allies including Russia.
OPEC+ sees the oil surplus growing to 2 million barrels per day (bpd) in January, 3.4 million bpd in February and 3.8 million bpd in March next year, an internal report seen by Reuters showed.
Some analysts expect OPEC+ to pause plans to add 400,000 bpd of supply in January.
“There is much to suggest that OPEC+ will not initially step up its oil production any further in an effort to maintain current prices at around $70/bbl,” PVM analyst Stephen Brennock said.
“OPEC+ have erred on the side of caution since it began slowly boosting supplies and a decision to shelve a planned increase output in January and keep its quota flat comports with its cautious approach.”
Several OPEC+ ministers, though, have said there is no need to change course.
But even if OPEC+ agrees to go ahead with its planned supply increase in January, producers may struggle to add that much.
A Reuters survey found OPEC pumped 27.74 million bpd in November, up 220,000 bpd from the previous month, but that was below the 254,000 bpd increase allowed for OPEC members under the OPEC+ agreement.
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