Oil prices rebound after sharp drop; OPEC+ mulls faster output boost

Investing.com-- Oil prices rose Thursday, bouncing after steep losses during the prior session, as investors digested plans for OPEC+ to ramp up production in June as well as potential tariff negotiations between the U.S. and China.

At 08:45 ET (12:45 GMT), Brent Oil Futures expiring in June edged 1.1% higher to $66.85 per barrel, while West Texas Intermediate (WTI) crude futures gained 1.3% to $63.08 per barrel.

OPEC+ members eye faster output hikes - Reuters

Both contracts settled nearly 2% lower on Wednesday in anticipation of increased supply from the Organization of the Petroleum Exporting Countries, and allies, a group known as OPEC+.

This followed Reuters reporting that several OPEC+ nations are pushing to accelerate oil output hikes in June, extending May’s surprise boost, as internal disputes over quota compliance deepen,

The proposed increase—potentially matching May’s 411,000 barrels per day rise—comes as oil prices hover near four-year lows amid a U.S.-China trade war and oversupply concerns. 

Eight OPEC+ countries will meet on May 5 to finalize the June plan, while divisions persist within the group, with the report suggesting that Saudi Arabia, the major producer in the group, was frustrated by overproduction from Kazakhstan and Iraq.

"This larger-than-expected increase comes as demand estimates are being cut amid ongoing trade tensions. Further disagreement between OPEC+ members is a clear downside risk, as it could lead to a price war," said analysts at ING, in a note.

Signs of U.S.-China tariff negotiations support oil

That said, oil prices are being supported by expectations of potential tariff negotiations between the U.S. and China.

The Wall Street Journal on Wednesday reported that the Trump administration is considering reducing tariffs on Chinese imports to de-escalate trade tensions.

Prior to this, Trump hinted at potential trade negotiations with China, saying a potential deal could lead to a “substantial” reduction in tariffs. But "it won’t be zero," he added.

A reduction of duties could lead to increased economic activity in China, the world’s largest crude importer.

U.S. crude inventories jump unexpectedly - EIA

The U.S. Energy Information Administration (EIA) on Wednesday reported that crude oil inventories increased by 244,000 barrels to 443.1 million barrels for the week ending April 18, defying analysts’ expectations of a 770,000-barrel draw. 

Meanwhile, both gasoline and distillate inventories fell more than anticipated. 

Gasoline stocks declined by 4.5 million barrels, surpassing the expected 1.4 million-barrel draw, while distillate inventories, including diesel and heating oil, dropped by 2.4 million barrels, far exceeding the forecasted 30,000-barrel decrease.

"Gasoline inventories have fallen for eight consecutive weeks, leaving them at the lowest level since December," ING added.

(Ayushman Ojha contributed to this article)