By Sibel Morrow
Oil prices were mixed in a volatile trading session on Wednesday over several upside pressures, including expected output cuts from the OPEC+ group, the decline in US crude stockpiles, storm-related supply disruptions in the Black Sea and a weaker US dollar.
International benchmark crude Brent traded at $81.38 per barrel at 10.30 a.m. local time (0730 GMT), a 0.11% decrease from the closing price of $81.47 a barrel in the previous trading session on Tuesday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $76.42 per barrel, up 0.01% from Tuesday’s close of $76.41 per barrel.
Prices fluctuated more than $2 a barrel during Tuesday’s trade over fears that the OPEC+ group will extend output cuts through next year to keep prices above $80 a barrel.
The ministers of the 23-member group are expected to convene on Thursday to discuss the trajectory of their production levels from January onward.
Experts caution that compliance with the production targets is one of the issues on the ministers' agenda, as some member countries, including Iraq, have been overproducing while some African countries, like Nigeria, are producing below their required level, impacting the efficacy of the group’s overall cuts.
Since October 2022, Saudi Arabia has been contributing to the group's joint cut of 2 million barrels per day (bpd), which will continue until the end of 2024, in addition to its output cut of approximately 1.5 million bpd planned to expire this December.
Among several upside price pressures was the draw in US crude oil inventories, which reflects healthy demand conditions in the world’s largest oil-consuming country.
The American Petroleum Institute (API) late Tuesday announced an estimated decrease of 817,000 barrels in US crude oil inventories, against the market expectation of a decline of 2 million barrels.
The US Energy Information Administration (EIA) will release actual data on oil stocks later on Wednesday, and if the stock decline is confirmed, the upward price spiral could continue.
- Supply disruptions contribute to upside price risks
Oil prices were boosted after reports of a disruption to oil exports from Kazakhstan and Russia from a severe storm in the Black Sea. The disruption resulted in a 56% reduction, or up to 2 million bpd, from Kazakhstan's output from its largest oilfields.
According to international media reports, Russian companies are rerouting exports to Baltic ports, while OPEC+ member Kazakhstan, with fewer export alternatives, faces further output declines.
Kazakhstan also produces over the agreed production quotas; however, weather-related disruptions will impact the country’s production in November and December.
Also, a weakening US dollar, triggered by comments from a normally hawkish Fed official suggesting US rate cuts are more likely than hikes anytime soon, contributed to price increases by making crude purchases more lucrative for holders of other currencies.
"Inflation rates are moving along pretty much like I thought," Fed Governor Christopher Waller said in an interview with a US-based think tank on Tuesday.
If the decline in inflation continues "for several more months ... three months, four months, five months ... we could start lowering the policy rate just because inflation is lower," he said.