Oil rose on Wednesday after gaining over 1% in the previous session as U.S. industry data showed a bigger-than-expected build in crude stockpiles, but the possibility of deeper output cuts from OPEC and its allies contained the decline.
West Texas Intermediate (WTI) crude futures for December delivery, the new front-month contract, grew $1.48, or 2.74%, to $55.79 per barrel. The November contract expired on Tuesday at $54.16.
Brent crude futures grew $1.48, or 2.48%, to $61.04 a barrel on Wednesday.
U.S. crude stocks rose by 4.5 million barrels to 437 million barrels in the week ended Oct. 18, compared with analysts’ expectations for a gain of 2.2 million barrels, data from industry group the American Petroleum Institute showed.
Inventory data from the U.S. Energy Information Administration (EIA) is due later on Wednesday.
The Organization of the Petroleum Exporting Countries (OPEC) is mulling whether to deepen production cuts amid concerns of weak demand growth next year, underpinning prices after helping to lift both benchmarks on Tuesday.
“The OPEC induced oil rally has come to a grinding halt in the wake of the bearish to consensus API inventory swell,” Stephen Innes, market strategist at AxiTrader, said in a note on Wednesday.
“Further OPEC cuts are unlikely the cure-all medicine. But by the numbers, the magnitude of the expected oversupply in 2020 is thought to be well within OPEC’s ability to manage,” Innes added.
OPEC and other oil producers including Russia, a group known as OPEC+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020. OPEC and other non-members are scheduled to meet again from Dec. 5 to 6.
OPEC’s de facto leader Saudi Arabia, however, wants to focus first on boosting adherence to the group’s output reduction pact before committing to more cuts, sources from the oil-producing club said.
Meanwhile, easing trade tensions between China and the United States, the world’s two largest economies and biggest oil consumers, were also helping to cushion overall sentiment for oil, traders said.
U.S. President Donald Trump said earlier this week that efforts to end the trade war with China were going well, while a similar view was echoed by Chinese Vice Foreign Minister Le Yucheng on Tuesday.
Washington and Beijing are trying to finalise the first phase of a trade agreement for Trump and Chinese President Xi Jinping to sign in November at the Asia-Pacific Economic Cooperation summit in Chile.
“Overall oil appears somewhat directionless (at current levels). Prices seem to have reached an equilibrium, for now, awaiting developments on trade and ahead of the OPEC+ meeting,” said Jeffrey Halley, senior market analyst at OANDA.