Producers expected to extend output cuts well beyond March expiry date
Oil edges up ahead of Opec meeting in Vienna, but uncertainty lingers
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) will be 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 media, at 10am (1pm UAE time) in Vienna on Thursday, before going into a closed session at noon, according to a tentative programme on Opec's website. non-Opec ministers are set to join at 3pm, followed by a joint press conference after the meeting.
Brent crude oil futures for February, the international benchmark for oil prices, were at US$62.73 a barrel at 0746 GMT, up 20 cents, or 0.3 per cent, from their last close. The front-month January contract expires today.
US West Texas Intermediate (WTI) crude futures were at $57.45 a barrel, up 15 cents, or 0.3 per cent.
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."
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 per cent from their March record, to 453.7 million barrels.
That is below 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.