Oil prices wavered after new government data Wednesday showed some disappointing signs on demand, but the market is still holding to gains tied to a meeting among exporters who may cap their output.
The oil market has been pushing higher since the Qatari oil ministry said members of the Organization of the Petroleum Exporting Countries will meet with Russian energy officials and other oil producers in April to hash out an agreement to limit output. Prices have rallied in recent weeks on hopes that such production limits will help alleviate the global glut of crude.
The market did, however, have a brief setback from U.S. Energy Information Administration data that showed gasoline stockpiles shrank less than expected last week. That erased nearly all the gains gasoline futures had made in early trading and briefly sent crude retreating, too, before it rebounded.
Light, sweet crude for April delivery recently gained $1.35, or 3.7%, to $37.68 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained $1.30, or 3.4%, to $40.04 a barrel on ICE Futures Europe.
Gasoline futures recently traded up 0.6% to $1.4164 a gallon, paring gains from earlier that had sent the market as high as $1.4365 a gallon. Diesel futures gained 3.7% to $1.2211 a gallon.
On Wednesday, the Qatari oil ministry said the preliminary agreement last month between OPEC and non-OPEC producers to limit their oil production to January levels has "put a floor under the oil price.” In recent weeks, Brent crude has rallied to around $40 a barrel, up from decade lows of less than $28 a barrel in January.
"The vast majority of the up move in prices seen over the last several months has been in anticipation of a meeting of producers with the expectation that a freeze deal will get done,” said Dominick Chirichella, oil analyst at the Energy Management Institute.
The next meeting to discuss output limits is to be held April 17 in Doha, Qatar, which holds the rotating presidency of OPEC this year and has been coordinating the effort.
Many have been skeptical of any deal, however, in large part from OPEC’s history of failing to follow through on pledges of production cuts and caps. Stockpiles are also brimming with supply around the world, and if exporters only freeze production and don’t cut it, that oversupply may not wane.
U.S. storage levels, both for crude alone and in total combined with refined fuels, increased last week, EIA said. Total stockpiles grew to 1.3474 billion barrels as of March 11, up from 1.3456 billion the week before.
Data released late Tuesday from the American Petroleum Institute, an industry group, had shown a slight decline. That didn’t happen in large part because gasoline stockpiles didn't fall as quickly as API and many analysts had expected. They dropped by just 747,000 barrels, compared with analysts’ expectations of a 2.6-million-barrel decline and API’s report of a 1.2-million-barrel decline.
"This rally is going to be especially difficult to sustain,” said Ric Navy, senior vice president for energy futures at brokerage R.J. O’Brien & Associates LLC. "There’s still plenty of inventory on the crude side. You’re building inventories, not great amounts, but the fact that it’s a build and that’s still negative.”
U.S. production did, however, make a slight decline to 9.07 million barrels a day, down from 9.08 the week before. It is a slight decline, but continues a longer trend of falling production down from a peak of 9.7 million last April.
"We may see some strength for prices coming from possible U.S. production declines,” wrote Daniel Ang, an investment analyst at Phillip Futures, but he added, "Based on fundamentals we expect prices to be moving downwards by the end of the week even if prices do increase today.”
(Wall Street Journal)
