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Oil rises 2% as OPEC complies with production cuts

Jessica Resnick-Ault
·2-min read
FILE PHOTO: A flare burns off excess gas from a gas plant in the Permian Basin in Loving County
FILE PHOTO: A flare burns off excess gas from a gas plant in the Permian Basin in Loving County

By Jessica Resnick-Ault

NEW YORK (Reuters) - Oil prices strengthened on Wednesday, as OPEC and its allies were seen complying with a pact to cut oil supply in September, even as concerns loomed that recovery in fuel demand will be stalled by soaring global coronavirus cases.

Early in the day crude was boosted by a bullish stock market. Even as equities whipsawed on pandemic worries, oil stayed higher, buoyed by expectations that OPEC could staunch a supply glut.

Wall Street's main indexes opened higher on Wednesday, supported by heavyweight technology stocks. The dollar traded lower, which can boost oil as investors switch asset classes.

"Between the dollar, the EIA and the warning from the IEA that may impact future OPEC policy, the tone has turned bullish here," said Bob Yawger, director of energy futures at Mizuho in New York.

Data from the U.S. Energy Information Administration (EIA)is expected to show crude oil stockpiles moving lower in the latest week, according to analysts polled by Reuters.

The American Petroleum Institute said U.S. crude inventories fell more than expected in the latest week, according to a report released after market close on Wednesday. Analysts expect the U.S. Energy Information Administration data to confirm that draw on Thursday, a Reuters poll showed.

Brent crude futures <LCOc1> for December delivery settled up 87 cents, or 2.05%, at $43.32 a barrel. U.S. West Texas Intermediate <CLc1> futures also traded higher, settling up 84 cents, 2.09%, at $41.04 a barrel.

OPEC+ had 100% compliance with a pact to cut oil supply in September was seen at 102%, two OPEC+ sources told Reuters.

The Organization of the Petroleum Exporting Countries' (OPEC) conformity with the oil output reduction in September was 105%, while non-OPEC compliance was 97%, one of the sources said.

"There is a risk that the demand recovery is stalled by the recent increase in COVID-19 cases in many countries," the International Energy Agency said on Wednesday.

OPEC cut its oil demand forecast on Tuesday, citing economic dislocations caused by the virus.

Russian Energy Minister Alexander Novak said that leading oil producers will start easing output curbs as planned in January despite a spike in coronavirus cases.

(Additional Reporting by Jessica Jaganathan and Dmitry Zhdannikov; Editing by Christian Schmollinger, David Goodman and Sandra Maler)