WASHINGTON (DTN) -- Nearby-delivery oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange drifted higher in afternoon trade Wednesday, with Brent crude settling above $48 per barrel (bbl). The gains came as traders anticipate members of the Organization of the Petroleum Exporting Countries, Russia and allied producers outside the cartel would reach consensus on extending current production cuts into 2021 Thursday following a two-day delay in their scheduled meeting.
The discussions follow the release of U.S. inventory data Wednesday morning that revealed the latest scars from lost demand in the world's largest oil consumer, with demand pressured from a worsening public health crisis that has further slowed the U.S. economy.
Energy Information Administration said nationwide gasoline and distillate fuel supplies rose by a combined 6.7 million bbl in the final week of November, and demand for motor gasoline plunged to a five-month-low 7.97 million barrels per day (bpd) at a time when Americans typically take to the roads en mass for holiday travels. High-frequency data has been pointing towards sagging driving demand since mid-September, with traffic volumes sliding deep below the Jan. 13 baseline.
California recently reimposed a stay-at-home order, and other large U.S. states beefed up restrictions on businesses and movement.
Even as recent vaccine developments are encouraging, major economies in the Western Hemisphere will face a rough winter amid the growing public health crisis which bodes ill for global oil demand. Center for Disease Control Director Robert R. Redfield warned Wednesday that the next three months could be the most difficult in the nation's public health history.
His comments, along with weakening U.S. oil demand come ahead of the OPEC+ meeting, with several producers wanting no change to the current agreement that would allow for a 2 million bpd production hike on Jan. 1. United Arab Emirates wants laggard members to make up for their missed quotas, taking an uncharacteristic strong position against its close ally Saudi Arabia. If no agreement is reached, the added barrels will likely swell global oil inventories since demand is nowhere near the levels needed to absorb the additional supply.
Wednesday's gains are a vote by the market that OPEC+ will adjust their agreement delaying the Jan. 1 production hike, with the market for weeks expecting a three-month extension of the 7.7 million bpd output cuts currently in effect through the first quarter of 2021.
Further supporting oil prices, Great Britain announced Wednesday the approval of a coronavirus vaccine, jumping ahead of the United States and the European Union in doing so. The first doses of the experimental vaccine developed by Pfizer and German partner BioNTech are scheduled to be administered in the UK as early as next week. Goldman Sachs projects the UK will be able to vaccinate about 50% of its population by March, followed by the United States and Canada in April, with Japan and Australia reaching those levels by early May.
On the session, West Texas Intermediate crude futures for January delivery gained 73 cents to settle at $45.28 per bbl, and ICE February Brent futures advanced 83 cents to $48.25 per bbl. NYMEX January ULSD futures finished 1.89 cents higher at $1.3662 per gallon, while the January RBOB contract added 1.95 cents to $1.2399 per gallon.
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