Oil futures drifted lower Tuesday, as traders await a meeting later this week of the Organization of the Petroleum Exporting Countries and its allies that will decide how much production to restore beginning next month.
“Crude prices are under increasing scrutiny as the market weighs the potential impact of incoming supply,” said Robbie Fraser, manager of global research & analytics at Schneider Electric, in market update.
“Topping that list is OPEC+, which is likely to continue scaling back record cuts in the months ahead,” he said, including the end of Saudi Arabia’s unilateral 1 million barrel per day cuts at the end of this month.
“Meanwhile, U.S. production continues to bounce back quickly from disruptions tied to extreme winter conditions in February, but longer-term production will need time to respond to higher prices,” said Fraser.
West Texas Intermediate crude for April delivery
fell by 6 cents, or 0.1%, to $60.58 a barrel on the New York Mercantile Exchange, though have climbed to as high as $61.21 during the session.
May Brent crude
the global benchmark, was down 7 cents, or 0.1%, at $63.62 a barrel on ICE Futures Europe after tapping an intraday high of $64.13. Both grades fell Monday.
Recent price action suggests “much of the positive news had already been priced in,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
A Reuters survey estimated that OPEC produced 24.89 million barrels a day in February, a drop of 870,000 barrels a day from January for the first monthly decline since June. OPEC+ had decided to keep output steady in February, while Saudi Arabia said it would unilaterally reduce production by 1 million barrels a day in February and March. The survey found Saudi Arabia cut output by 850,000 barrels a day in February.
If other OPEC+ countries moved to step up supply by 500,000 barrels a day, Saudi Arabia would likely withdraw its voluntary cut, Weinberg said, which would boost April production alone by more than 1.3 million barrels a day compared with the Reuters survey for February.
“Added to this would presumably also be higher production from Russia and other non-OPEC countries. Since demand in the West remains fairly fragile, we expect prices to fall in the short term,” Weinberg said.
OPEC+ will hold a committee meeting on Wednesday to offer a recommendation on production levels and the group will hold its main decision-making gathering on Thursday.
Meanwhile, a weekly report on U.S. petroleum supplies will be released by the American Petroleum Institute late Tuesday, followed by official data from the Energy Information Administration early Wednesday.
Analysts expect the EIA to report a climb of 1.3 million barrels in domestic crude supplies for the week ended Feb. 26, according to a survey by S&P Global Platts. They also forecast supply declines of 2.9 million barrels for gasoline and 3.9 million barrels for distillate inventories, which include heating oil.
April natural gas
tacked on 2.6% to $2.849 per million British thermal units.