Oil prices little changed after early gains on OPEC deal hopes
Reuters
Published Nov 22, 2016 11:16AM ET
Oil prices little changed after early gains on OPEC deal hopes
By Scott DiSavino
NEW YORK (Reuters) - Oil prices were little changed on Tuesday after earlier rising to their highest levels this month as a growing consensus emerged in the market that OPEC would overcome internal disputes and strike a deal to reduce crude output.
But the market remained sensitive to comments from officials attending a technical meeting of the Organization of the Petroleum Exporting Countries (OPEC) which was trying to hammer out the details of an agreement before the formal meeting on Nov. 30.
Brent futures (LCOc1) were up 27 cents, or 0.6 percent, at $49.17 a barrel by 10:51 a.m. EST (1551 GMT). U.S. crude (CLc1), meanwhile, were down 6 cents, or 0.1 percent, at $48.18 per barrel. Brent came within 4 cents of $50 earlier in the session, its highest since Oct. 28.
The premium of U.S. futures for the second month CLc2 over the front-month
After weeks of doubts over the resolve of the 14-member cartel, most oil market participants now believe OPEC would harm its reputation if an output cut deal were not struck next week.
"It now appears the cartel will patch together a deal designed to reduce production by as much as three-quarters of a million barrels per day," Jim Ritterbusch, president of Chicago-based energy advisory Ritterbusch & Associates said in a note, giving the probability of such a deal as 80-90 percent.
Prices on Tuesday were initially boosted by comments from a Nigerian official attending the OPEC technical meeting that it was likely all countries would be "on board" by the end of the day.
But they briefly slumped back into negative territory after OPEC sources told Reuters agreement to a 4.0-4.5 percent output cut by all members aside from Libya and Nigeria would still hinge next week on the backing of Iran and Iraq.
OPEC is trying to bring its members and non-OPEC producer Russia to agree on a coordinated cut to prop up the market, beset by a two-year glut in supplies, by bringing production into line with consumption.
It said at the end of September it aimed to cut production to between 32.5 million and 33 million barrels per day compared with its recent record output of around 33.8 million bpd.
While a ceiling for overall OPEC production may be agreed by Nov. 30, it is unclear whether clear quotas per member state would be set. Some countries, such as Nigeria, Iraq, Libya and Iran, argue they should be exempt because their output has been hit by conflict or sanctions.
"Ultimately, it looks as if Saudi Arabia and its allied Gulf neighbors will reduce production on their own," analysts at Commerzbank (DE:CBKG) said.
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"No ground-breaking agreement on production caps or cuts should be expected from the OPEC meeting. The oil market is likely to remain oversupplied for some time yet even after the OPEC meeting, especially since U.S. oil production will soon start rising again."
U.S. crude inventories have been building for three straight weeks but were forecast to have slipped about 300,000 last week, ahead of data from the American Petroleum Institute at 4:30 p.m. (2130 GMT).
Written By: Reuters
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