After a two-day rally ahead of an OPEC meeting, oil held gains, as the group considers the biggest supply cut since 2020 to help revive prices.
West Texas Intermediate futures traded near $86 a barrel after rising nearly 9% over the previous two sessions. Before the group meets in Vienna later Wednesday, delegates said that the cartel is set to discuss reducing output by as much as 2 million barrels a day. That is double the volume previously flagged.
A cut of that magnitude would reflect the scale of concern from the producer group about the outlook for energy demand in the face of tighter monetary policy. After Russia invaded Ukraine, oil capped its first quarterly decline in two years.
The Organization of Petroleum Exporting Countries and its allies may discuss a slightly smaller cut of 1.5 million barrels a day, said delegates. Even a reduction of that size is likely to draw criticism from the US and other major oil-consuming nations, which have been battling energy-driven inflation.
Carley Garner, founder of DeCarley Trading LLC, said in a Bloomberg television interview that they think we're setting up for a buy the rumor, sell the fact situation. OPEC is not meeting their quotas as it is already. A US official said a proposed price cap on Russian oil could be announced within a few weeks, which is another factor that will complicate the supply outlook. While the US-led measure is intended to deprive the Kremlin of revenues for its war in Ukraine and keep crude flowing, President Vladimir Putin has threatened to withhold supply.
According to people familiar with the figures, the American Petroleum Institute reported that US crude stockpiles dropped by 1.77 million barrels last week. The data is due later Wednesday, according to the Energy Information Administration.
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