Oil Steadies After Two-Day Drop With OPEC+ and Shutdown in Focus

(Bloomberg) -- Oil eased for a third day as traders weighed the prospect that OPEC+ may fast-track its output hikes along with building US stockpiles.

West Texas Intermediate traded near $61 a barrel, after falling more than 5% in the previous two days. This weekend, the alliance is slated to discuss potentially lifting output in three monthly installments of 500,000 barrels a day to recoup market share, a delegate said, though OPEC said it doesn’t have plans to hike by that amount and talks haven’t started yet.

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Adding to oversupply concerns, US oil reserves rose 1.8 million barrels last week, while inventories of gasoline and distillates also expanded, the Energy Information Administration reported. US gasoline consumption pulled back to a six-month low, leading futures to decline and raising concerns of near-term demand deterioration.

In wider markets, traders were tracking a US government shutdown that began after Congress failed to meet a funding deadline of midnight Washington time. US equity futures edged lower, along with shares in Asia.

Crude capped a back-to-back monthly drop in September, as an earlier round of OPEC+ supply hikes bolstered expectations that global output will run ahead of demand. While stockpiling by China — the world’s largest oil importer — has lent some support to prices in recent quarters, the International Energy Agency has predicted there’ll be a record surplus next year.

“Our near-term balances now appear even more bearish than what we had previously characterized as “cartoonishly” oversupplied,” Macquarie analysts including Marcus Garvey wrote in a note. “Even though nominal supply increases have fallen short of announced levels, the shift in sentiment adds to bearish expectations,” they said of OPEC+ increases.

Gauges of benchmark Middle Eastern crude, meanwhile, came under pressure on Wednesday as the prospect of higher supplies from the region grows — prices in the region also slipped earlier in the week. That added to the bearish sentiment for futures.

--With assistance from Yongchang Chin and Rong Wei Neo.