Oil up 2% on supply worries ahead of OPEC+ meeting

© Reuters. FILE PHOTO: Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Scott DiSavino

NEW YORK (Reuters) - Oil futures rose about 2% on Tuesday as traders worried that this week's meeting of OPEC+ producers may not lead to a further boost in crude supply.

The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, meet on Wednesday. Two of eight sources said a modest output hike would be discussed. The rest said a boost was unlikely.

OPEC+ trimmed its forecast for an oil market surplus this year by 200,000 barrels per day (bpd) to 800,000 bpd, three delegates told Reuters.

Brent futures rose $1.65, or 1.7%, to $101.68 a barrel by 12:25 p.m. EDT (1625 GMT).U.S. West Texas Intermediate (WTI) crude rose $1.60, or 1.7%, to $95.49.

"There's a lot more uncertainty this time around," said Craig Erlam of brokerage OANDA of the OPEC+ meeting. "The decision this week will tell us just how unified the group still is."

Russia's invasion of Ukraine in February fed worries about global oil supply and sent prices soaring. In March, Brent jumped close to its all time high of $147.50 a barrel. But with central banks raising interest rates to fight inflation, worries about slowing growth have eclipsed tight supply.

Surveys showed factories across the United States, Europe and Asia struggled for momentum in July as flagging global demand and China's strict COVID-19 restrictions slowed production.

"These readings did nothing to mitigate the fears of recession," said Tamas Varga at oil broker PVM.

Casting a cloud over the market are worries that U.S. Speaker of the House Nancy Pelosi's visit to Taiwan will escalate tensions between the United States and China. Stocks slipped and bond yields fell on worries about the visit.

The United States, meanwhile, imposed sanctions on Chinese and other firms it said helped to sell tens of millions of dollars' in Iranian oil and petrochemical products to East Asia. Washington is trying to raise pressure on Tehran to curb its nuclear program.

Also supporting crude prices, analysts polled by Reuters forecast U.S. crude inventories fell by 500,000 barrels last week.

The American Petroleum Institute (API), an industry group, will issue its U.S. inventory report at 4:30 p.m. EDT (2030 GMT). the U.S. Energy Information Administration (EIA) reports at 10:30 a.m. EDT (1430 GMT) on Wednesday.