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HomeLatestOil Prices Hold Steady at 5-Month Peaks Ahead of OPEC Meeting
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Oil Prices Hold Steady at 5-Month Peaks Ahead of OPEC Meeting

Oil prices maintained their upward trajectory in Asian trading on Wednesday, hovering near five-month highs as indications of dwindling U.S. inventories and the potential for further disruptions to Russian supply painted a tighter picture for the global crude market.

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Attention has now turned to the upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), scheduled for later in the day. While market expectations lean toward a decision to maintain current production levels, anticipation remains high regarding any potential policy shifts.

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Tensions in the Middle East escalated following Iran’s pledge to retaliate against Israel for strikes on the Iranian embassy compound in Damascus, fueling concerns of potential disruptions to oil supplies in the region. Consequently, oil prices surged to levels not seen since late October.

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In the futures market, Brent oil futures for June delivery edged up 0.2% to $89.13 a barrel, while West Texas Intermediate (WTI) crude futures rose by the same margin to $84.42 a barrel as of 20:19 ET (00:19 GMT).

Despite the bullish sentiment driven by expectations of constrained supplies, the stronger dollar and uncertainties surrounding U.S. interest rate dynamics acted as limiting factors on broader gains in crude prices.

Earlier this week, oil prices received a boost after Mexico announced plans to reduce its oil exports.

US Oil Inventories Expected to Decline, API Reports

Data released by the American Petroleum Institute (API) on Tuesday revealed a nearly 2.3 million barrel decrease in U.S. crude inventories for the week ending March 28, surpassing expectations of a 2 million barrel drawdown. This marks the third weekly reduction in inventories out of the past four weeks, suggesting a tightening of the U.S. oil market.

Amid increased exports aimed at compensating for the supply gap left by Russia and OPEC, coupled with the anticipated rise in demand during the spring and summer seasons, expectations for a tightening U.S. oil market have strengthened. Similar trends are anticipated in official inventory data scheduled for release later on Wednesday.

OPEC Likely to Maintain Current Production Levels

The OPEC+ alliance is widely anticipated to keep production levels unchanged during its ministerial panel meeting later on Wednesday. The cartel recently affirmed its commitment to maintaining existing production cuts until at least the end of June, signaling satisfaction with the tightening of market conditions observed through late 2023 and early 2024.

Refinery Disruptions in Russia, Middle East Conflict Drive Market Uncertainty

Ukraine’s assault on Russia’s third-largest oil refinery earlier this week, although reportedly causing non-critical damage according to Reuters, adds to a series of attacks targeting Russia’s energy infrastructure. These incidents could potentially impede oil exports from Moscow further.

In the Middle East, the possibility of Iran becoming directly involved in the Israel-Hamas conflict has heightened market jitters. Tehran’s vow to retaliate for a strike on its embassy in Damascus, which it attributed to Israel, adds another layer of geopolitical complexity to the oil market outlook.

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