Oil prices climbed higher Thursday as a group of top producers met to discuss potential further output reductions to support the market.
By 09:25 ET (14.25 GMT), U.S. crude futures traded 1.2% higher at $78.77 a barrel and the Brent contract climbed 1.1% to $83.78 a barrel.
OPEC+ meeting looms large
The Organization of the Petroleum Exporting Countries and allies, including Russia, a group known as OPEC+, is meeting Thursday, amid expectations of additional output cuts, with both crude benchmarks set to lose between 3% and 5% in November.
The meeting was originally scheduled for the weekend, but was delayed reportedly after a number of African countries complained about their lower 2024 production targets.
Saudi Arabia, Russia and other members of OPEC+ have already pledged total oil output cuts of about 5 million barrels per day, about 5% of daily global demand, in a series of steps that started in late 2022.
This includes Saudi Arabia’s additional voluntary production cut of 1 million barrels a day, which is due to expire at the end of December, and a Russian export cut of 300,000 barrels a day until the end of the year.
“There are growing expectations that they could make deeper supply cuts, which would be in addition to the rollover of the voluntary cuts from Saudi Arabia and Russia,” said analysts at ING, in a note. “Clearly, this growing expectation leaves downside risk for the market if OPEC+ disappoint later today.”
Bearish U.S. inventories overlooked
This has helped the market overlook a relatively bearish report from the Energy Information Administration, which saw U.S. crude inventories rise by an unexpected 1.6 million barrels in the week to Nov. 24, when the market had expected a small draw.
Additionally, purchasing managers index figures from China showed that manufacturing activity contracted further in November, while growth in overall business activity slumped to its weakest levels for the year.
Signs of a continued economic decline in the country spurred concerns over just how resilient Chinese oil demand will remain in the coming months. The country built up a large level of stockpiles this year, which could reduce its appetite for crude imports going into 2024.
Inflation on the retreat
Also helping the tone was further evidence that inflation was in retreat in most of the major western economies, adding to the narrative that central banks were likely at the end of their rate-hiking cycles.
The Federal Reserve’s preferred inflation measure rose at a slower rate on an annual basis in October compared to the prior month, rising 3.0% annually compared with 3.4% in September, thanks in large part to a drop in energy prices.
In Europe, eurozone inflation tumbled more than expected for a third straight month in November, rising 2.4% in November from 2.9% in October, well below expectations for 2.7%.
