Oil Snaps 5-Day Losing Streak on Potential OPEC+ Production Cuts

(Bloomberg) -- Oil reversed five days of losses as the potential for an OPEC+ production cut overshadowed an uptick in U.S. crude inventories.

Futures climbed 2.3% in New York on Wednesday, gaining the most in a month. Oil markets earlier jumped more than 4% before easing gains as a meeting of OPEC+ officials in Vienna failed to reach a consensus on how to address the impact of the coronavirus. The group extended talks to a third day.

“There's a lot of optimism in the market from OPEC showing they're willing to play ball,” said John Zanner, senior strategist at Uplift Energy Strategy. “OPEC also has to balance supply disruptions from Venezuela to Libya and getting Russia to come on board, but the current optimism has some runway.”

Crude's rebound was a reversal for bearish traders concerned the economic havoc wreaked by China's coronavirus outbreak will translate into fuel-demand weakness.

A panel of technical experts from the Organization of Petroleum Exporting Countries and its allies weighed the impact of the crisis, with Saudi Arabia pushing for deeper oil-production while Russia favored an extension of the current deal.

In the U.S., prices barely reacted to an Energy Information Administration report that showed a bigger-than-expected rise in American crude inventories. The report also showed the first gasoline draw in 12 weeks.

West Texas Intermediate for March delivery gained $1.14 to settle at $50.75 a barrel on the New York Mercantile Exchange.

Brent for April settlement rose $1.32 to close at $55.28 on the London-based ICE Futures Europe exchange, putting its premium over WTI at $4.36.

Despite Wednesday's price rebound, near-term contracts were trading for less than future months, a market condition known as contango that signals an oversupply.

Other oil-market news:

Gasoline futures rose 3% to settle at $1.4863 a gallon. Oil traders and sellers are making more inquiries for supertankers to hoard crude at sea in the latest indication of the crushing impact the coronavirus is having on demand in the world's biggest importer. Technical gauges showed that Brent and WTI were the most oversold since 2018 at Tuesday's close. The coronavirus is hampering the Canadian oil industry's efforts to build relations with crude buyers in Asia.

--With assistance from Alex Longley, Sharon Cho and James Thornhill.

To contact the reporter on this story: Jackie Davalos in New York at jdavalos10@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick, Jessica Summers

©2020 Bloomberg L.P.

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