Oil plunged on Wednesday after U.S. industry data showed a bigger-than-expected build in crude stockpiles, but possible deeper production cuts coming from the Organisation of Petroleum Exporting Countries, OPEC, and its allies prevented a further slide in prices.
International benchmark Brent crude futures dropped 28 cents, or 0.47 per cent, to $59.42 a barrel, while the West Texas Intermediate (WTI) crude futures fell 40 cents, or 0.73 per cent to $54.08 per barrel.
The U.S. crude stocks rose by 4.5 million barrels to 437 million barrels in the week ended October 18, compared with analyst expectations for a gain of 2.2 million barrels, data from industry group the American Petroleum Institute showed.
The OPEC, is mulling whether to deepen production cuts amid concerns of weak demand growth next year, underpinning prices after helping to lift both benchmarks more than 1 per cent in the previous session.
“Crude oil prices jumped sharply (on Tuesday) on news that OPEC was considering further production cuts,” ANZ Research said in a note, adding to earlier gains in the previous session as many companies posted improved outlooks.
The OPEC and other oil producers including Russia, which have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020, are scheduled to meet again on December 5-6.
OPEC’s de facto leader Saudi Arabia, however, wants to focus first on boosting adherence to the group’s output reduction pact with Russia and other non-members before committing to more cuts, sources from the oil-producing club said.
Meanwhile, easing trade tensions between China and the United States, the world’s two largest economies, were also helping to cushion overall sentiment for oil, traders said.
U.S. President Donald Trump said earlier this week that efforts to end the trade war with China were going well, while a similar view was echoed by Chinese Vice Foreign Minister Le Yucheng on Tuesday.
Washington and Beijing are trying to finalise the first phase of a trade agreement for Trump and Chinese President Xi Jinping to sign in November at the Asia-Pacific Economic Cooperation summit in Chile.