Oil steady; market eyes OPEC+ meet, weak demand indicators By Reuters

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© Reuters. An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS/File Photo

By Jeslyn Lerh

SINGAPORE (Reuters) -Oil was little changed on Thursday as investors remained cautious ahead of expected production cuts by the OPEC+ group, and as weaker-than-expected Chinese factory data underscored slowing growth in the world’s second largest economy.

futures climbed 13 cents, or 0.2%, to $83.23 a barrel by 0740 GMT, while U.S. West Texas Intermediate crude futures rose 17 cents, or 0.2%, at $78.03 a barrel.

The benchmark oil contracts settled nearly 2% higher the previous day amid hopes of some form of a price-supportive resolution from the OPEC+ group, which includes the Organization of Petroleum Exporting Countries and allies including Russia.

Members of OPEC+ are due to hold a policy meeting on Thursday. Talks ahead of the meeting were focusing on additional production cuts, although details were yet to be agreed, sources close to the group told Reuters.

“The countdown to the upcoming OPEC+ meeting is now underway, and that has been the central focus for oil prices, as market participants have been shrugging off any bearish news in the way for now,” said Yeap Jun Rong, market strategist at IG.

“We have a larger-than-expected build-up in crude inventories from the EIA data, along with a downside surprise in China’s PMI figures this morning. Both may support a narrower supply-demand deficit, but failed to cause much dent in prices,” Yeap added.

China’s manufacturing activity contracted for a second straight month in November and at a quicker pace than expected, an official factory survey showed on Thursday, suggesting more policy support measures are needed to help shore up economic growth in the world’s largest oil importer.

The official purchasing managers’ index (PMI) fell to 49.4 in November from 49.5 in October, staying below the 50-point level demarcating contraction from expansion. Analysts polled by Reuters had expected a reading of 49.7.

Meanwhile, the U.S. Energy Information Administration on Wednesday reported a surprise build in oil and distillate fuel stocks last week, indicating weak demand. Gasoline stocks also rose by more than expected, the data showed. [EIA/S]

“The market ignored what was a relatively bearish inventory report from the EIA,” said analysts from ING, adding that all eyes are on the OPEC+ meeting.

“Adding to the uncertainty from the meeting is that it is still not clear if the group has been able to resolve a disagreement over Angolan and Nigerian production targets for next year,” the analysts said.

African members of OPEC+ producer group Angola and Nigeria are aiming for higher oil output, officials had told Reuters.

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