Oil Futures Advance

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange edged higher in overnight trade following Wednesday's data-driven rally. The Organization of Petroleum Exporting Countries and 10 partners led by Russia began their two-day biannual policy meeting in Vienna on Thursday to debate the extension of 1.2 million barrels per day (bpd) production cut agreement.

According to CME's OPEC Watch Tool, markets now price in 69% probability that OPEC+ will rollover the existing deal and decreased their bets to 25.55% that they will agree to deepen cuts at their meeting.

At 8 a.m. EST, NYMEX January West Texas Intermediate futures were up $0.23 near $58.66 barrel (bbl) and ICE February Brent contract gained $0.49 to $63.49 bbl. NYMEX January ULSD futures added 1.04 cents to $1.9333 gallon and NYMEX January RBOB futures increased 1.42 cents to $1.6184 gallon.

Markets turned their focus to the gathering of delegates from the 24-member group of producing countries known as OPEC+ that collectively control nearly half of the world's crude output. Wire services reported Saudi Arabia is leading the debate to cut an additional 40% above the existing 1.2 million bpd in production curbs, equating to an additional 800,000 bpd, according to cartel officials.

That follows comments from Iraq's oil minister on Wednesday, indicating key members would prefer deeper supply cuts to counter an expected rise in global inventories next year.

However, markets remain skeptical that other members of the alliance, in particular Russia, would agree to such an aggressive expansion in cuts. Russia Energy Minister Alexander Novak has so far declined to comment on his country's position regarding the latest proposal.

Reuters reported on Thursday Iran would support a majority decision by OPEC members to cut oil production, citing the country's OPEC envoy.

The first round of meetings among OPEC members began Thursday and will be followed by a meeting on Friday with Russia and other producers.

Oil futures surged more than 4% on Wednesday after government data reported the first drawdown from U.S. commercial crude oil supply in six weeks and detailed a sharp rebound in refinery runs during the final week of November. U.S. refinery run rate jumped 2.6% to a 91.9% of capacity last week.

The drop in commercial crude supplies was a much larger-than-expected 4.9 million bbl, offsetting the bearish builds in product stocks.

EIA data also showed an eighth consecutive weekly draw from the Strategic Petroleum Reserve and the fourth straight draw from Cushing supply hub in Oklahoma -- the delivery location for the NYMEX WTI futures contract.

In financial markets, U.S. equities are set for a higher opening on Thursday, with Dow Jones Industrial Average futures up 100 points in early trading, along with S&P 500 and Nasdaq futures, after the stock market rally rebounded Wednesday on positive China trade deal headlines. That comes after U.S. President Donald Trump signaled an extended China trade war Tuesday.

Liubov Georges can be reached at liubov.georges@dtn.com

(CZ)

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