A five-day rally in oil prices paused Wednesday as investors awaited OPEC's decision about extending production cuts.
The Organization of the Petroleum Exporting Countries is meeting in Vienna Thursday to decide whether to extend a production cut agreement struck late last year and for how long. Investors were weighing possible scenarios and tracking headlines streaming from Vienna Wednesday.
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"I think a lot of people were just sitting on their hands," said Tariq Zahir, managing member of Tyche Capital Advisors.
U.S. crude futures settled down 11 cents, or 0.2%, at $51.36 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, fell 19 cents, or 0.4%, to $53.96 a barrel on ICE Futures Europe.
Oil has been buoyed in recent days by reports that Saudi Arabia has garnered support within OPEC for a nine-month extension of ongoing production cuts. Oil prices have gained about 4% this month, but are still down close to 6% from this year's highs, as market participants have become skeptical that the reductions by OPEC members and other major producers are working to bring down global inventory levels.
Iraq oil minister Jabbar al-Luaibi said Wednesday that he supports extending the cuts for another nine months. A joint committee comprised of OPEC and non-OPEC members also recommended extending the cuts for nine months. Russia's oil minister said there would be discussion Thursday of extending the cuts for another full year.
"A strong consensus has developed that producer supply cuts will be extended. The only question is the choice of the duration," analysts at BNP Paribas wrote in a client note Wednesday.
Though market observers have been anxiously waiting for bloated U.S. stockpiles to shrink, investors shrugged off a 4.4 million barrel decrease in crude stockpiles reported by the U.S. Energy Information Administration Wednesday. The drop was twice as large as what analysts surveyed by The Wall Street Journal were anticipating and the seventh straight week of declining inventories.
But the U.S. Energy Information Administration also reported Wednesday that gasoline stockpiles dropped by just 787,000 barrels last week, compared with a one million barrel decrease forecast by analysts and traders surveyed by The Wall Street Journal.
The smaller-than-anticipated drop in gasoline stockpiles renewed concerns about demand heading into summer driving season. Memorial Day weekend typically kicks off a period of high demand for fuel in the U.S., when drivers take to the roads for summer travel.
"That draw is not up to par, and it disappointed accordingly," said Bob Yawger, director of the futures division of Mizuho Securities USA Inc. "It really has pulled the rug out from under the energy market here," he said.
Gasoline futures fell 0.88 cent, or 0.5%, to $1.6526 a gallon. Diesel futures fell 0.04 cent to $1.6063 a gallon.
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(END) Dow Jones Newswires
May 24, 2017 15:47 ET (19:47 GMT)