By Arathy Somasekhar
(Reuters) -West Texas Intermediate (WTI) crude oil futures pared gains on Wednesday after a U.S. official said the country was continuing to consider tools to manage energy prices, and as government data pointed to weaker gasoline demand.
Oil prices were also weighed down by a new coronavirus variant triggering fresh travel restrictions that could dampen oil demand and after an OPEC+ document showed the group forecasting a bigger oil surplus in the new year than previously thought.
WTI U.S. crude futures were trading $1.3, or 2.02%, higher at $67.51 a barrel at 12:04 p.m. ET (1619 GMT), after paring some gains immediately after the weekly government stock data. They were up as much as 4% earlier in the session.
Global benchmark Brent crude was up $1.5, or 2.3%, at $71.75 a barrel.
U.S. Deputy Energy Secretary said the Biden administration could adjust the timing of its planned release of strategic crude oil stockpiles if global energy prices drop substantially.
He added that the White House was still studying proposals from some of Biden’s fellow Democratic lawmakers to ban crude oil exports to keep prices down, saying it remained among the range of tools the administration could eventually use.
U.S. gasoline stocks rose 4 million barrels last week to 215.4 million barrels, government data showed, compared with analysts’ expectations in a Reuters poll for 29,000-barrel rise. Distillate stockpiles increased 2.2 million barrels to 123.9 million barrels, versus expectations for a 462,000-barrel build. [EIA/S]
Crude inventories fell 910,000 barrels in the week, data showed, compared with forecasts for a 1.2 million-barrel drop.
The Organization of the Petroleum Exporting Countries concluded its meeting on Wednesday without a decision on whether to release more oil into the market.
The OPEC+ alliance, which includes Russia and other producers, will likely take a policy decision on Thursday. Reports and analysts suggested that expectations were growing that the group will take a pause due to the threat from a new virus variant.
“There is much to suggest that OPEC+ will not initially step up its oil production any further in an effort to maintain current prices at around $70/bbl,” PVM analyst Stephen Brennock said.
OPEC+ sees the oil surplus growing to 2 million barrels per day (bpd) in January, 3.4 million bpd in February and 3.8 million bpd in March next year, an internal report seen by Reuters showed.
Several OPEC+ ministers, though, have said there is no need to change course. But even if OPEC+ agrees to go ahead with its planned supply increase in January, producers may struggle to add that much.
Both Brent and WTI front-month contracts in November posted their steepest monthly falls in percentage terms since March 2020, down 16% and 21% respectively.
Analysts at Goldman Sachs called the plunge in oil prices “excessive,” saying “the market has far overshot the likely impact of the latest variant on oil demand with the structural repricing higher due to the dramatic change in the oil supply reaction function still ahead of us.”
(Additional reporting by Sonali Paul in Melbourne and Koustav Samanta in SingaporeEditing by Louise Heavens, Mark Potter and David Evans)