Oil markets opened cautiously on Thursday ahead of the outcome of an OPEC meeting in Vienna later in the day, with members set to debate the path for an extension of the group’s supply-cut agreement.
The Organisation 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.
US West Texas Intermediate (WTI) crude futures were at $57.33 a barrel at 0108 GMT, virtually unchanged from their last settlement.
Brent crude futures LCOc1, the international benchmark for oil prices, had not traded at that time.
While there has not been an official statement, OPEC and Russia seem set to prolong oil supply cuts, which came into place last January and are currently scheduled to expire next March, until the end of 2018.
There may be a review of the deal in June, should the market overheat amid healthy demand and ongoing supply restraint.
“The crude market is currently fixated on the outcome of the OPEC meeting ... The current consensus is that members will agree on an extension to the production cuts but the duration of the extension is uncertain,” said William O‘Loughlin, investment analyst at Rivkin Securities.
“Most analysts expect OPEC and Russia to merely extend the oil production agreement by another nine months to the end of 2018. This outcome may already be priced in as many oil ministers have been hinting at this for months,” said Fawad Razaqzada, analyst at futures brokerage Forex.com.
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 concerns is rising output in the United States, thanks largely to shale drillers, who are fast gaining market share especially in Asia, the world’s biggest consumer region, and are undermining the club’s efforts to tighten the market.
US crude oil production C-OUT-T-EIA hit a new record of 9.68 million barrels per day (bpd) last week, according to government data released on Wednesday.
Rystad Energy, a consultancy, said it expects US oil production to reach 9.9 million barrels per day in December.
That would bring US output close to levels of top producers Russia and Saudi Arabia.
Despite this, US commercial crude inventories C-STK-T-EIA have fallen by more than 15 per cent from their March record to 453.7 million barrels, below levels at this time in 2015 and 2016, although they remain above 5 year average levels.
Traders said the fall in inventories was largely down to the two-week interruption of the Keystone pipeline bringing Canadian crude to the United States, and as American companies increasingly export excess crude.
