© Reuters. Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania US, October 5, 2017. REUTERS/Brendan McDermid/Files
By Rowena Edwards
LONDON (Reuters) – Oil prices rose by over 2% on Wednesday on signs of tighter supply, a weaker dollar and optimism over a Chinese demand recovery.
But the likelihood that OPEC+ will leave output unchanged at its upcoming meeting limited the gains.
Futures rose $2.06, or 2.48% to $85.09 per barrel at 1044 GMT. The more active February Brent crude contract rose by 2.02% to $85.95.
US West Texas Intermediate (WTI) crude futures climbed $1.69, or 2.16%, to $79.89.
Support followed expectations of tighter crude supply.
oil stocks dropped by 7.9 million barrels in the week ended Nov. 25, according to market sources citing American Petroleum Institute figures on Tuesday. [API/S]
Official figures are due from the US Energy Information Administration on Wednesday. [EIA/S]
And the International Energy Agency expects Russian crude production to be curtailed by some 2 million barrels of oil per day by the end of the first quarter next year, its chief Fatih Birol told Reuters on Tuesday.
On the demand side, further support came from optimism over a demand recovery in China, the world’s largest crude buyer.
China reported fewer COVID-19 infections than on Tuesday, while the market speculated that weekend protests could prompt an easing in travel restrictions.
Guangzhou, a southern city, relaxed COVID prevention rules in several districts on Wednesday.
A fall in the US dollar was also bearish for prices. A weaker greenback makes dollar-denominated oil contracts cheaper for holders of other currencies, and boosts demand.
Fed Chair Jerome Powell is scheduled to speak about the economy and labor market on Wednesday, with investors looking for clues about when the Fed will slow the pace of its aggressive interest rate hikes.
Capping gains, the OPEC+ decision to hold its Dec. 4 meeting virtually signals little likelihood of a policy change, a source with direct knowledge of the matter told Reuters on Wednesday.
“Market fundamentals favor another cut, especially given the uncertainty over China’s COVID situation… Failure to do so risks sparking another selling frenzy,” said Stephen Brennock of oil broker PVM.
