Oil futures higher on production cut hopes as inventory build limits gains - Yahoo Finance

FILE PHOTO: Oil pump jacks work at sunset near Midland, Texas

By Jessica Resnick-Ault

NEW YORK (Reuters) - Crude prices edged up on Wednesday, buoyed by hopes that OPEC and its allies will strike a production cut agreement, but surging U.S. crude inventories muted the gains.

Thursday's videoconference meeting between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia was expected to be more successful than their gathering in March, which ended in a failure to extend supply cuts and a price war between Saudi Arabia and Russia.

"The coming extraordinary producing-countries meeting is the only hope on the horizon for the market," said Bjornar Tonhaugen of Rystad Energy.

"Nobody wants to go short ahead of what could be a 'positive surprise' by OPEC++."

Brent crude was up 32 cents, or 1%, at $32.19 by 12:46 p.m. EDT (1646 GMT). U.S. West Texas Intermediate (WTI) crude rose 45 cents to $24.08 a barrel, after trading as high as $25.29 a barrel.

Both contracts pared gains after the United States posted its largest crude inventory surge on record, with Brent turning negative briefly.

U.S. crude inventories rose 15.2 million barrels in the week, as refiners slashed runs and the storage hub at Cushing filled more quickly than expected, the U.S. Energy Information Administration said in a weekly report on Wednesday.

Demand has fallen as the coronavirus outbreak forced closures of businesses and schools.

"There are multiple bad angles: Refining utilization. Crude stockpiles. Cushing is crazy - that's a gigantic number," said Bob Yawger, director of energy futures at Mizuho in New York. The Cushing, Oklahoma, storage hub, which serves as the delivery point for the New York Mercantile Exchange U.S. oil futures contract, is on pace to be full in three weeks if this week's gain is repeated, Yawger said.

Crude has collapsed in 2020 because of a slide in demand due to the coronavirus outbreak and excess supply. Brent dropped to $21.65, its lowest since 2002, on March 30.

While OPEC sources have said a deal to cut production is conditional on the participation of the United States, doubts remain as to whether Washington will contribute.

The U.S. Department of Energy said on Tuesday U.S. output was already declining, without government action.

(Additional reporting by Alex Lawler and Jane Chung; editing by Jan Harvey, Jason Neely, Tom Brown and David Gregorio)

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