Oil drops as OPEC+ production cut fears fade, potential cuts may not be imminent
Oil prices fell on Wednesday, taking a breather after the previous day's gain of nearly 4% as fears of an imminent production cut by the Organization of the Petroleum Exporting Countries and its allies subsided.
Global benchmark Brent crude futures fell 40 cents, or 0.4%, to $99.82 a barrel as of 0337 GMT after rising 3.9% on Tuesday.
The West Texas Intermediate (WTI) crude oil futures contract was down 27 cents, or 0.29%, at $93.47 a barrel, after rising up 3.7% yesterday.
Both contracts rose on Tuesday as paper and physical markets became increasingly disconnected as de facto OPEC leader Saudi Arabia's energy minister pointed to the possibility of supply cuts to stabilize a market he described as "schizophrenic".
With OPEC+ currently delivering around 2.8 million barrels per day less than its monthly target, the math for production disruptions appears to be increasingly complex.
Nine OPEC sources said in a statement that potential OPEC+ production cuts may not be imminent, and this could coincide with Iran's return to oil markets if it signs a nuclear deal with the West.
A senior US official told Reuters on Monday that Iran has given up on some of its basic demands to resurrect the deal.
Most investors consider Tuesday's rally to be exaggerated as they know that even if a deal is struck to revive Tehran's 2015 nuclear deal, it will take several months for Iranian oil to flow to the international market, meaning OPEC+ won't cut production that fast.
According to API data of yesterday, crude stocks are falling and fuel stocks are rising.
The market doesn't have much room for negative thinking due to the strong demand for heating fuel for the winter. The recent rise in the US heating fuel market and rising natural gas prices have boosted expectations for stronger heating fuel demand and tighter crude oil supplies.
U.S. gas prices rose above $10 for the first time in nearly 14 years as prices surged in Europe, where supplies are tight.
U.S. crude inventories fell nearly 5.6 million barrels in the week ended Aug. However, gasoline stocks increased by about 268,000 barrels, while distillate stocks increased by about 1.1 million barrels.
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