Oil Pares Losses Amid Renewed Speculation of OPEC Production Cut

Oil pared losses amid renewed speculation that OPEC and its allies are considering cutting supply next year.

Futures in New York steadied after Reuters reported OPEC and its partners are discussing a reduction of as much as 1.4 million barrels a day, deeper than the cut proposed last weekend. The price move followed a record 12 days of declines amid surging supply from Saudi Arabia, Russia and the U.S., and fears of dwindling demand.

Oil has fallen sharply from the four-year high reached in early October as the U.S. issued surprise waivers for some buyers of sanctioned Iranian oil, while top producers boosted output. Saudi Arabia took the lead to counter the price slide, saying this week that producers needed to cut about 1 million barrels a day, and that it would reduce its own exports by half that amount next month.

“If OPEC acts together and takes away barrels from the market, we will go back to above $70,” Michele Della Vigna, head of energy-industry research at Goldman Sachs Group Inc., said in a Bloomberg Television interview. That “will be an extraordinarily positive environment for the industry as a whole.”

West Texas Intermediate for December delivery traded down 0.2 percent at $55.60 a barrel on the New York Mercantile Exchange at 11:30 a.m. London time. The contract dropped 1 percent earlier on Wednesday and plunged 7.1 percent in the previous session, the biggest one-day decline in more than three years. Total volume traded was more than double the 100-day average.

Brent for January settlement was up 10 cents at $65.57 a barrel on the London-based ICE Futures Europe exchange, after slumping $4.65 on Tuesday. The global benchmark crude traded at a $9.82 premium to WTI for the same month.

Suhail Al Mazrouei, United Arab Emirates energy minister and president of the Organization of Petroleum Exporting Countries, said Wednesday that OPEC and its allies will adjust production as needed to balance the market. If the group needs to reduce output, it will do so, he said in a Bloomberg Television interview in Abu Dhabi.

In its monthly report on Wednesday, the International Energy Agency welcomed the oil market’s return to surplus, saying it offered respite to consumers in emerging markets worst affected by crude’s rally. The IEA expects inventories in industrialized nations to jump by 2 million barrels a day in the first half of next year if current output is maintained.

Other oil-market news: OPEC Secretary-General  Mohammad Barkindo said Wednesday that OPEC and its partners are  committed to sustaining “this balance that we fought very hard in the last two years to restore.” In another sign of the severity of the recent sell-off, traders were paying the most in two years for  options on futures contracts as they looked for protection — or profit — from the collapse.  The richest shale areas in the U.S. will have been  exploited by the mid-2020s, meaning the average well drilled in 2025 will be less productive than today, according to the International Energy Agency’s annual World Energy Outlook.