©Reuters. Oil pours from a spout from Edwin Drake’s original 1859 well that started the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania, United States October 5, 2017. REUTERS/Brendan McDermid/Files
By Laila Kearney and Trixie Sher Li Yap
(Reuters) – Oil prices posted gains of more than 1% in Asian trading on Wednesday on falling inventories and a lower dollar, but concerns that OPEC+ will leave production unchanged at its upcoming meeting and weak data from China will cap gains.
Futures were up 95 cents, or 1.14%, to $83.98 a barrel by 0411 GMT, while US West Texas Intermediate (WTI) crude oil futures were up 80 cents, or 1.02%, to $79.00 a barrel.
According to market sources, citing figures from the American Petroleum Institute on Tuesday, US crude inventories are likely to have fallen about 7.9 million barrels in the week ended November 25, helping to boost prices.
Gasoline inventories rose about 2.9 million barrels, while distillate inventories rose about 4.0 million barrels, according to the sources, who spoke on condition of anonymity.
Official figures are expected from the US Energy Information Administration on Wednesday.
Slight support also came from a weaker US dollar. Fed Chair Jerome Powell is expected to speak on the economy and jobs at a Brookings Institution event on Wednesday, when investors will look for clues as to when the Fed will slow the pace of its aggressive rate hikes.
“Energy markets are not properly pricing in how resilient the global economy remains, and this week we could see an upward revision in US Q3 GDP numbers,” OANDA senior analyst Edward Moya said in a note to clients.
Weak liquidity and an overall lack of trading volume towards the end of the year could also support the market, according to Energy Aspects’ Virendra Chauhan.
On the supply side, OPEC+ is likely to leave its oil production policy unchanged at a meeting on Sunday, five OPEC+ sources said, although two sources said an additional production cut is also likely to be considered to support prices.
“The oil rally ran out of steam after reports said OPEC+ may eventually hold production steady. Expectations were growing that they would seriously consider a production cut,” added Moya.
The group meets as the economy slows and China’s COVID-19 lockdowns hurt oil demand, while an upcoming European Union ban on Russian crude oil imports and a G7 price cap on Russian crude raise questions about supply.
Gains were further dampened by ongoing concerns about the Chinese economy, as data showed manufacturing and services activity declined further to a seven-month low in November, weighed down by slowing global demand and COVID-19 restrictions.
The official manufacturing purchasing managers’ index (PMI), according to data from the National Bureau of Statistics (NBS), was 48.0 from 49.2 in October, the lowest in seven months.
On the bright side from China were fewer COVID-19 infections day by day and talks about some possible changes in COVID-19 movement restrictions.