WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange reversed higher in early morning trade Wednesday on reports Organization of the Petroleum Exporting Countries together with Russia-led partners are considering extending 7.01 million barrels per day (bpd) cuts into April amid concerns over flagging demand in Asia and slowing economic growth in the Eurozone, where the world's largest economy has likely fallen into recession in the first quarter.
Overnight reports indicate key members of the OPEC+ alliance are leaning towards an extension of the current production curbs for another month when the group meets in Vienna on Thursday. In contrast, the market widely expects the producers would ease cuts by around 1.5 million bpd, with OPEC's leader, Saudi Arabia, ending its voluntary production cut of 1 million bpd.
On Tuesday, a document from OPEC+ experts called "for cautious optimism" for global oil demand, citing "the underlying uncertainties in the physical markets and macro sentiment, including risks from COVID-19 mutations that are still on the rise."
The virus mutations and painfully slow rollout of the vaccine in parts of the world prompted German officials this week to extend a nationwide lockdown until the end of March, dampening economic activity in the Europe's largest economy that increases the likelihood the eurozone is trapped in recession. Eurozone's final Purchasing Managers' Index for February was 48.8, marking the fourth consecutive month of contraction in business activity.
The eurozone's slow vaccine rollout means European leaders might be fighting COVID-19 longer than elsewhere in the world, slowing an economic recovery. AS a result, eurozone's economy is now seen falling far behind that of the United States and China, raising the risk of a prolonged uneven recovery in global oil demand moving further into the year.
Domestically, the economy is growing, turbocharged by generous federal stimulus and the likelihood for additional stimulus as the U.S. Senate debates a massive $1.9 trillion package, while Operation Warp Speed begun under the Trump administration and enhanced by the Biden administration accelerates the rate of inoculations that brings the country closer to herd immunity.
On Tuesday, U.S. President Joe Biden pledged every American would have access to a COVID-19 vaccine by the end of May -- two months ahead of a previous pledge. Centers for Disease Control and Prevention data show the United States administrated 78.2 million doses since the onset of the immunization program, bringing the daily inoculation rate to 1.8 million doses. This week, Fed's Atlanta GDPNow model lifted its first-quarter growth projections to 10%, up from 8.8% on Feb. 26. After this month's Institute of Supply Management's Manufacturing Index, the nowcast estimates first quarter personal consumption growth would jump 10% from its previous outlook to 17.7%, and domestic investment growth was pegged at 18.7%, up from 8.8% just a week ago.
Early Wednesday, traders also position ahead of the weekly inventory report from the Energy Information Administration due out 10:30 a.m. ET after industry data reported a much larger-than-expected crude build in the final week of February. American Petroleum Institute showed commercial crude oil supplies posted a 7.356 million per barrel (bbl) build in the week reviewed versus an expected 700,000 bbl draw. Stocks at the Cushing, Oklahoma, hub increased by 732,000 bbl. Gasoline stockpiles plunged far more than expected, sliding 9.933 million bbl last week while distillate inventories tumbled more than expected, sinking 9.053 million bbl.
In early trading, NYMEX West Texas Intermediate April crude surged $1.16 to near $61 bbl and Brent crude futures for May delivery advanced to $63.86 bbl. NYMEX April ULSD contract rallied 2.77 cents or 1.5% to $1.8343 gallon and front-month RBOB gained 1.68 cents to $1.9532 gallon.
Liubov Georges can be reached at email@example.com