Oil gains amid push by Saudi Arabia for further supply cuts

TOKYO (Reuters) – Oil prices rose on Tuesday, as OPEC and its allies discuss whether to deepen a supply cut pact ahead of meetings this week, although prospects after Saudi Arabia’s planned listing of Aramco fuelled uncertainty for traders, limiting gains.

FILE PHOTO: Oil pump jacks at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz

Brent futures LCOv1 rose 13 cents, or 0.2%, to $61.05 a barrel by 0424 GMT, after gaining 0.7% on Monday.

U.S. West Texas Intermediate crude CLc1 was up by 20 cents, or 0.4%, at $56.16 a barrel. The contract rose 1.4% on Monday.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are discussing a plan to increase an existing supply cut of 1.2 million barrels per day (bpd) by a further 400,000 bpd and extend the pact until June, two sources familiar with the matter said.

Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the initial public offering (IPO) of state-owned Saudi Aramco, the sources said.

The “oil price is little moved today, suggesting that traders are sceptical about the additional 400,000 bpd cut on top of the extension of (the) current production cut agreement,” said Margaret Yang, market analyst at CMC Markets in Singapore.

“The question is what they are going to do after the Aramco IPO and that creates uncertainty for the oil prices,” Yang said.

OPEC ministers will meet in Vienna on Thursday and the wider OPEC+ group will gather on Friday.

Concerns about the inability of the United States and China, the world’s two biggest oil users, to reach a preliminary deal to resolve their 17-month trade dispute also weighed on oil prices, along with discouraging U.S. economic data.

A senior adviser to President Donald Trump said a U.S.-China trade deal was still possible before the end of the year, adding that the first phase of the agreement was being put to paper, but the talks have been dragging on for weeks now.

And while OPEC may cut output, U.S. producers have been only to happy to match any market shortfalls, with production setting successive records. Growth into 2020, though, may range between 100,000 bpd and 1 million bpd.

U.S. crude inventories are expected to have declined last week, which may support prices, with analysts in a preliminary Reuters polls suggesting a contraction of 1.8 million barrels.

In a sign of buying interest for oil, fund managers increased net long positions in U.S. crude futures and options in the week to Nov. 26, the U.S. Commodities Futures Trading Commission said.

Reporting by Aaron Sheldrick; Editing by Christian Schmollinger and Clarence Fernandez

Leave a Reply