Oil Rises With Lower US Stockpiles and OPEC Meeting to the Fore

(Bloomberg) — Oil extended a rally after an industry report pointed to a drawdown in US crude inventories, ahead of an OPEC meeting at which the group is expected to affirm current supply cuts.

Futures for global benchmark Brent rose toward $90 a barrel after closing at the highest level since October on Tuesday. West Texas Intermediate was above $85. The American Petroleum Institute reported nationwide stockpiles fell by more than 2 million barrels last week, according to people familiar with the figures. The estimates also showed declines in gasoline and distillate inventories.

OPEC and its allies are due to review crude markets and supply policy at an online gathering on Wednesday, and officials predict they’ll keep the overall strategy unchanged. Still, there could be tough words for countries that are exceeding their assigned limits.

Crude has pushed higher this year, with Ukrainian attacks on Russian energy infrastructure and Middle East tensions supporting prices. OPEC’s curbs have been tightening the market, even though some members have stalled on delivering their agreed-upon cuts in full and as Russian exports surge.

“With OPEC already extending its voluntary production cuts until mid‑year, the virtual OPEC meeting later today will likely just reaffirm the group’s current policy,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia. “Brent oil futures should track closer to $75 to $80 a barrel in coming months given our view that China’s oil demand growth will disappoint.”

Meanwhile, oil options markets are more bullish — with traders increasingly looking to protect against rising prices. Brent’s second-month options skew has flipped from its usual put skew to the opposite bias for calls, as producers generally seek to protect against price drops. The flip comes as timespreads move further into backwardation, another indicator of strength.

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