On Wednesday, oil prices closed higher as inventory data came in much better than expected. The inventory data that came in better than expected was for the U.S. market. It is the sixth out of seventh week where inventory has dropped. Oil also edged higher thanks to the upcoming OPEC meeting next month, where a deal might be achieved in cutting crude output. The final item that pushed the price of oil higher wasdrop in production in China. The U.S. has seen less output over the last few months, and this has had a positive impact on the price. Based on the enormous drop of the stockpile, oil had surged to a 15-month high. WTI crude oil closed higher by 2.6% to $52.61 a barrel. Brent crude oil settled higher by 1.7% to $52.57 a barrel.

Stockpile Drops

The Energy Information Administration — EIA — reported that crude stockpiles fell by 5.2 million barrels for the week ending October 14. This data is particularly good for two reasons. The first reason is that it beat expectations, because analysts expected a build of 2.7 million barrels. The second reason being that there was a fall in stockpiles instead of a buildup. This is a highly important piece of information. A drop in stockpiles by a large amount indicates a dramatic pickup in demand. There also was a large drop in the amount of imports as well. U.S. crude imports fell by 912,000 barrels per day — bpd — last week. This brought the total imports for the week to 6.47 million bpd. This has been the lowest level for imports since 2015. It doesn’t make too much sense that imports into the U.S. have fallen that much. Especially, since OPEC and other countries had recently increased their amount of output.

Price Run

The price of oil has run up significantly over the last few weeks. The price of oil has surged as much as 15% over the last three weeks. This was largely due in part because of the OPEC meeting setting to take place next month. It was also a culmination of speculation that a deal would be reached after said meeting. If a deal is reached it would be the first one to be done in over eight years. The last of such deals was done back in 2008, where there was a deal to cut production significantly. In September, OPEC and non-OPEC members met in Algeria to try and flesh out a deal to cut production. What came out of that meeting was a pretty legitimate understanding. It was announced that the OPEC countries could potentially reduce as much as 700,000 bpd. This would be done in order to boost the price of oil.

China Production Halt

With the way the price of oil fluctuates, it is dictated by supply and demand. Well, a drop in crude output in China spells for a positive global outlook for oil prices. That is because China’s oil production fell to a six year low. Crude output fell by 9.8% to 3.9 million barrels per day — bpd. By China’s output falling by that much it gives confidence to the market that global supplies are starting to come down by a lot. This was a highly positive report for oil traders. Although, this was not good for China’s economy itself. What such an event will do is lift the price of oil. At least both WTI crude and Brent crude oil have been able to breach the $50 level. If a deal is produced in next month’s OPEC meeting, then the price of oil could reach as high as $60 a barrel. As long as the production between most countries stays the same or drops, then oil should have no problem heading to that price or higher. That’s why the meeting is important and should be monitored for those who are trading oil. It is a key binary event that will shift the price of oil in one direction or another.