By Barani Krishnan
Investing.com — After treading water or sliding for four straight sessions, oil rallied on Tuesday for the first time since traders got excited over talk of new OPEC+ production cuts, with crude prices gaining almost 2% ahead of the release of weekly U.S. inventory data.
New York-traded West Texas Intermediate, or WTI, settled up $1.79, or 2.2%, at $81.53 per barrel.
WTI’s session high of $81.57, however, fell short of the $81.81 peak achieved in the heat of the OPEC+ announcement on April 4 that it was taking off another 1.7 million barrels daily from global output to result in a supply squeeze totaling 2.7M barrels per day. The gap up open on April 3, right after the announcement, also remains unfilled.
London-traded Brent settled up $1.43, or 1.7%, at $85.61. Brent’s session high of $85.67 was also lower than the April 3 peak of $86.44.
The run-up came after the U.S. Energy Information Administration, or EIA, issued a short-term energy outlook that was slightly positive for oil.
Also helping oil was a moderate weakening in the dollar on regurgitated talk of the Federal Reserve pausing on rate hikes after consumer inflation data due also Wednesday.
“It’s quite comical to see oil gain almost $2 on these grounds,” said John Kilduff, partner at New York energy hedge fund Again Capital. “I’d agree if we see such an upside from a major crude draw tomorrow but this is really quite overdone for today. But what’s there to say? People fear a supply squeeze, and OPEC has a history of overplaying sentiment and underdelivering on pledges.”
Market participants were also on the lookout for U.S. weekly oil inventory data, due after market settlement from API, or the American Petroleum Institute.
The API will release at approximately 16:30 ET (21:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week April 7. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.
For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 0.583M barrels, versus the 3.739-M barrel reduction reported during the week to March 31.
On the gasoline inventory front, the consensus is for a draw of 1.6M barrels over the 4.12M-barrel decline in the previous week. Automotive fuel gasoline is the No. 1 U.S. fuel product.
With distillate stockpiles, the expectation is for a drop of 0.764M barrels versus the prior week’s deficit of 3.632M barrels. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.