Oil slips ahead of OPEC+ decision on production cuts

By Nicole Jao

NEW YORK (Reuters) -Oil futures fell nearly 2% on Wednesday as investors awaited an imminent OPEC+ decision on production cuts, while a larger-than-expected draw in U.S. crude stockpiles last week lent some support to prices. 

Brent crude futures fell $1.31, or 1.78%, to settle at $72.31 a barrel. U.S. West Texas Intermediate crude futures fell $1.40, or 2%, to $68.54.

On Tuesday, Brent posted its biggest gain in two weeks, rising by 2.5%.

The market was on tenterhooks, with investors focused on the upcoming OPEC+ meeting, analysts said.

The Organization of the Petroleum Exporting Countries and its allies in OPEC+ meet on Thursday, and are likely extend output cuts until the end of the first quarter of next year, industry sources told Reuters.

"While a delay to unwinding production cuts is expected, the rhetoric out of the meeting is going to have the biggest sway," said Matt Smith, Kpler lead Americas oil analyst.

OPEC+ has been looking to phase out supply cuts through next year.

A single bank sold a large volume of U.S. oil futures contracts in early afternoon trading on Wednesday, a source told Reuters, pushing prices down more than 1% within minutes and causing traders to scramble to decipher the reason.

U.S. crude stocks fell more than expected last week as refiners ramped up operations, the Energy Information Administration (EIA) said. Gasoline and distillate stockpiles rose by more than expected during the week. 

"A pop in refining activity with runs climbing to a high not seen since the summer has resulted in a see-saw of crude inventories drawing and products building," Smith said.

The bullish momentum only lent some support to prices.

A shaky ceasefire between Israel and Hezbollah, South Korea's curtailed declaration of martial law and a rebel offensive in Syria that threatens to draw in forces from several oil-producing countries all lent support to oil prices, said Priyanka Sachdeva, senior market analyst at Phillip Nova.

In the Middle East, Israel said on Tuesday it would return to war with Hezbollah if their truce collapses and that its attacks would go deeper into Lebanon and target the state itself.

In South Korea, lawmakers have submitted a bill to impeach President Yoon Suk Yeol after his declaration of martial law on Tuesday, which was reversed within hours, sparking a political crisis in Asia's fourth-largest economy.

(Reporting by Nicole Jao in New York, Arunima Kumar in Bengaluru and Emily Chow in Singapore; Additional reporting by Paul Carsten; Editing by David Goodman, David Evans, Will Dunham and David Gregorio)