November 29, 2017 by Ben Sharples and Alex Longley
Oil pared losses on speculation that OPEC may cap Libyan and Nigerian supply and the group’s output cuts won’t be phased out during any extension next year.
Futures traded down 0.2 percent in New York after earlier falling 0.9 percent. Ecuador’s oil minister said a committee of OPEC members and its partners would recommend that Libya and Nigeria — currently exempt from curbs — freeze output at current levels, while Iraq said the majority of nations support a nine-month extension and there would be no slippage over that period.
Oil has dropped this week from a two-year high on uncertainty about the outcome of Thursday’s meeting of the Organization of Petroleum Exporting Countries. While the global oversupply relative to the five-year average has more than halved since January, the surplus still stands at 140 million barrels, OPEC Secretary-General Mohammad Barkindo said Monday. Including Libya and Nigeria in cuts could boost the group’s efforts to rebalance the market.
“You have a slightly more bullish scenario where you bring Libya and Nigeria into the deal and then you could see some slight support,” says Jens Pedersen, senior analyst at Danske Bank. “If you fail to bring others in and you get voices talking about this being the final round of cuts, then you could see oil sell off slightly.”
West Texas Intermediate for January delivery was at $57.85 a barrel on the New York Mercantile Exchange, down 14 cents, at 1:06 p.m. London time, after falling 12 cents on Tuesday. Total volume traded was about 20 percent below the 100-day average. WTI has averaged about $54 this quarter, the highest since the second quarter of 2015.
Brent for January settlement, which expires Thursday, lost 0.2 percent to $63.50 a barrel on the London-based ICE Futures Europe exchange, after dropping 0.4 percent Tuesday. The global benchmark traded at a premium of $5.65 to WTI. The more-active February contract fell 18 cents to $63.06.
U.S. crude inventories rose by 1.82 million barrels last week, the American Petroleum Institute was said to report, even as it noted a large decline at the storage hub in Cushing, Oklahoma. The institute’s reported increase in nationwide stocks is in contrast to a Bloomberg survey, which shows supplies may have dropped by 2.95 million barrels. The Energy Information Administration will report the data later Wednesday.
While Russia and OPEC have crafted the outline of a deal to continue curbs for nine months, Moscow still has concerns that supporting prices above $60 will help U.S. shale rivals, people familiar with the matter said. Many producers agree that output cuts should be extended to the end of next year to stabilize the market, Oman Oil Minister Mohammed Al Rumhy said in Vienna. Last quarter, oil explorers took advantage of a market rally to lock in prices for almost 1 million barrels a day’s worth of future output, signaling the shale boom’s staying power as OPEC ponders extending supply curbs.