Oil edges up ahead of OPEC meeting in Vienna, but uncertainty lingers

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‍Oil prices edged up on Thursday, ahead of an OPEC meeting in Vienna at which producers are expected to extend a supply-cut deal that came into effect in January with the goal of tightening supplies and propping up prices.

The Organization of the Petroleum Exporting Countries (OPEC) are meeting at its headquarters in the Austrian capital, along with ministers from other oil producing countries, most importantly Russia.

OPEC is scheduled to hold an open session, including the media, at 10 a.m. (09:00 GMT) in Vienna on Thursday, before going into a closed session at noon, according to a tentative program on OPEC’s website. Non-OPEC ministers are set to join at 3 p.m., followed by a joint press conference after the meeting.

OPEC logo is seen at the Organisation of Petroleum Exporting Countries (OPEC). /VCG Photo

Brent crude oil futures for February, the international benchmark for oil prices, were at 62.73 US dollars a barrel at 07:46 GMT, up 20 cents, or 0.3 percent, from their last close.

US West Texas Intermediate (WTI) crude futures were at 57.45 US dollars a barrel, up 15 cents, or 0.3 percent.

While there has not been an official statement, OPEC and Russia seem ready to prolong their oil supply cuts until the end of 2018. The cuts were put in place last January and are set to expire next March.

However, an extension may include a review in June should healthy demand amid ongoing supply restraint overheat the market.

“OPEC loves leaving an ace card up their sleeve, they will never give everything away (in advance),” said Matt Stanley, a fuel broker at Freight Investor Services in Dubai.

ANZ bank said “anything less than a nine-month extension to the current production agreement could see the recent sell-off accelerate.”

Soaring US production

One of OPEC’s biggest problems while cutting supplies has been rising US output, which is gaining global market share and undermining the producer club’s efforts to tighten the market.

“Unless OPEC don’t extend the cuts as long as people think... the real winners (of OPEC’s cuts) will be the US producers,” Stanley said.

US oil production hit a new record of 9.68 million barrels per day (bpd) last week, according to government data released on Wednesday.

That is up from 8.5 million bpd at the end of last year, before the cuts were implemented.

Rystad Energy, a consultancy, said it expects US oil production to reach 9.9 million bpd in December, which would bring it close to top producers Russia and Saudi Arabia.

Despite this, US crude inventories are down by 15 percent from their March record, to 453.7 million barrels, that is also below their record at the same time in 2015 and 2016.

Traders said the fall in inventories was largely down to a two-week interruption of the Keystone pipeline bringing Canadian crude to the United States, which has now been resolved, and as American companies increasingly export excess crude.

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Source(s): Reuters