Global oil prices tested two year highs again Wednesday, led by U.S. benchmark crude, as an expected dip in domestic production combined with ongoing disruptions to imports from Canada lifted markets ahead of next week's OPEC summit in Vienna.
WTI futures for delivery in January traded early in the European session at $57.88, up $1.05 or 1.85%, leaving prices just shy of their two-year high of just over $58. International benchmark Brent crude futures for delivery in January traded at $63.18, up $0.61 or 0.97%.
WTI's gain was underpinned by expectations that U.S. government data, due on Wednesday, will show that supply from U.S. producers dipped about 2.2 million barrels in the past week. That report follows the American Petroleum Institute data, released on Tuesday, which tallied a 7.2 million barrel fall in U.S. stockpiles.
Pressure on supplies is set to continue due to disruptions of imports from Canada's tar fields following the temporary closure of the Keystone crude pipeline. Operator Transcanada Corp. (TRP) said deliveries will be cut by at least 85% through to the end of November, while it repairs a leak that has spilled about 5,000 barrels of oil in South Dakota.
"The shutdown of the Keystone pipeline could limit barrels into Cushing (the U.S.'s biggest oil-storage hub) and help clear one of the more stubborn areas of crude inventory," Goldman Sachs analysts wrote Wednesday.
Outside of the U.S. all eyes are on next week's OPEC-led summit in Vienna, where the world's largest oil exporters, including Russia, are expected to discuss an extension to production caps that are due to expire in March.
OPEC support for an extension appears solid, while Russian officials have been meeting with their domestic oil companies to gauge support. Reports this week claimed that the majority of Russian oil companies have lined up behind a six-month extension, with only Gazprom Neft arguing against the prolongation.
Markets are already pricing in the announcement of an extension following the OPEC-led meeting on Nov. 30, according to Dutch bank ING, which warned that such confidence comes with risks. "An outcome at the OPEC meeting which falls short of market expectations, will likely lead to a selloff, and given the large speculative long in Brent, this could be fairly severe," wrote ING analysts.
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