Oil futures edged lowerWednesday, puling back from a nearly 11-month high set a day earlier after Saudi Arabia surprised traders with a unilateral production cut.
West Texas Intermediate crude for February delivery fell 29 cents, or 0.6%, to $49.64 a barrel on the New York Mercantile Exchange, after closing Tueday. March Brent crude the global benchmark, was down 6 cents, or 0.1%, at $53.54 a barrel on ICE Futures Europe. Both benchmarks closed Tuesday at their highest levels since late February.
“The action taken by Saudi Arabia, along with the bulk of other OPEC+ producers maintaining current output levels means that the oil market should continue to draw down inventories over 1Q21, and as a result oil prices should remain well supported,” said Warren Patterson, head of commodities strategy at ING, in a note.
Crude futures jumped on Tuesday after Saudi Arabia announced it would cut output by an additional 1 million barrels a day in February and March. The announcement came after a difficult meeting of the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, that saw major producers agree to hold output steady while Russia and Kazakhstan would boost production by a combined 75,000 barrels a day.
U.S. inventory data will also be in focus Wednesday too.
The American Petroleum Institute, an industry group, reported late Tuesday that U.S. crude supplies fell by 1.7 million barrels for the week ended Jan. 1, according to sources. The data also showed gasoline stockpiles up by 5.5 million barrels, while distillate inventories climbed by 7.1 million barrels. Crude stocks at the Cushing, Okla., storage hub, meanwhile, edged up by 1 million barrels for the week, sources said.
More closely folowed inventory data from the Energy Information Administration will be released Wednesday. Analysts at IHS Markit expect the EIA to report a decline of 1.2 million barrels in crude supplies. They also expect inventory increases of 1.4 million for gasoline and 2.2 million for distillates.