Oil extends gains on prospect of OPEC+ sticking with supply cuts

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 U.S. fuel inventories.

Brent crude futures added 52 cents, or 0.8%, to $64.59 a barrel, as of 0709 GMT, after climbing more than 2% on Wednesday. U.S. West Texas Intermediate (WTI) crude futures gained 43 cents, or 0.7% to $61.71 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 and for OPEC leader Saudi Arabia to end its voluntary production cut of an additional 1 million bpd.

"The Reuters report has introduced a binary outcome to today's meeting," said Jeffrey Halley, OANDA's senior market analyst for Asia Pacific.

Citi analysts said the sustained recovery in crude oil prices is beginning to expose differences across OPEC+ countries, but it expects the group to find a compromise for a nominal production increase of 500,000 bpd.

The bank also expects Saudi Arabia to hold on its voluntary extra cut of 994,000 bpd, keeping its production quota at 8.256 million bpd.

Further supporting prices, Yemen's Houthi forces said on Thursday they had fired a missile at a Saudi Aramco facility in Saudi Arabia's Red Sea city of Jeddah. There was no immediate confirmation from Saudi authorities.

"I believe that accounts for most of the price increases in Asia this morning," Halley said.

In the United States, despite a record surge of more than 21 million barrels in crude oil stockpiles last week, gasoline stocks fell by the most in 30 years as refining plunged to an all-time low due to the Texas freeze that knocked out power for millions.

The United States turned into a net petroleum importer last week at 2.2 million bpd, Citi analysts said.

 

(Reporting by Naveen Thukral and Florence Tan; Editing by Kenneth Maxwell and Christopher Cushing)