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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Wednesday after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers, while private industry figures showed U.S. crude stockpiles were down last week.

With prices rising to their highest level since February 2020, traders now await the latest inventories data from the U.S. government at 15:30 GMT, while assessing the impact of the surge in coronavirus cases on future demand as many countries consider new restrictions and shutdowns.

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At 10:44 GMT, February WTI crude oil is at $50.40, up $0.47 or +0.94% and March Brent crude oil is at $54.38, up $0.78 or +1.46%.

OPEC+ Summit Recap

Saudi Arabia, the world’s biggest oil exporter, agreed on Tuesday to make additional voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting with the Organization of the Petroleum Exporting Countries (OPEC) and other major producers that form the group known as OPEC+.

The reductions agreed by Saudi Arabia were included in a deal to persuade other producers in the OPEC+ group to hold output steady.

With coronavirus infections spreading rapidly in many parts of the world producers are trying to support prices as demand takes a hit from new lockdowns being put in place.

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American Petroleum Institute Weekly Inventories Report

The API reported late Tuesday a draw in crude oil inventories of 1.663 million barrels for the week ending January 1. Analysts were looking for an inventory draw of 1.271 million barrels for the week.

The API reported a large build in gasoline inventories of 5.473 million barrels for the week ending January 1 – compared to the previous week’s 718,000-barrel draw. Analysts had expected a 1.662-million-barrel build for the week.

Distillate inventories also saw a massive increase of 7.136 million barrels for the week, compared to last week’s 1.877-million-barrel decrease, while Cushing inventories rose this week by 1.003 million barrels.

Daily Forecast

Later today, traders will get the opportunity to react to the latest inventories data from the U.S. Energy Information Administration (EIA) at 15:30 GMT. Traders are looking for a 2.8 million barrel drawdown. This would be bigger than the draw reported by the API.

Although the markets are rising in reaction to the bullish OPEC+ agreement, keep in mind that it may actually mean the major producers, especially Saudi Arabia, are becoming worried about weakening demand as lockdowns return. They are not just cutting output to drive prices higher. They are genuinely concerned about adding to the supply glut.

For a look at all of today’s economic events, check out our economic calendar.

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