Oil steadies as caution sets in ahead of OPEC meeting
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[November 21, 2017]
By Polina Ivanova
LONDON (Reuters) - Oil prices were only
slightly firmer on Tuesday as traders looked ahead to a meeting next
week at which major crude exporters are expected to extend production
cuts but the prospect of rising U.S. output capped gains.
Brent crude oil <LCOc1> was up 12 cents at $62.34 a barrel at 1145 GMT.
U.S. light crude <CLc1> was at $56.56, up 14 cents.
Analysts said Brent was expected to fluctuate in a narrow range, between
$61 and $63, as the market awaited the outcome of the Organization of
the Petroleum Exporting Countries' meeting on Nov. 30.
OPEC, together with a number of non-OPEC producers led by Russia, has
been restraining output this year in an effort to end a global supply
overhang and prop up prices.
At its meeting next week, the group is widely expected to extend the
deal beyond its March 2018 expiry date.
"There's a general belief that anything but an extension could have a
significant negative impact... So the market is just waiting for
confirmation that OPEC wants to move on with the extension," said Ole
Hansen, senior manager at Saxo Bank.
But doubts about the willingness of some participants including Russia
to keep restricting production has led traders to take a more cautious
approach and weighed on prices.
"We cannot avoid focusing on the very extended long position that's
currently in the market. It needs to be fed continued bullish news,"
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A pump jack is seen at sunrise near Bakersfield, California October
14, 2014. REUTERS/Lucy Nicholson/File Photo
"As we've had a bit of a lull in that over the past week and a half, we have
seen prices drift ... lower."
However, the biggest headache for OPEC has been a rise in U.S. drilling
activity, led by shale oil producers.
Energy consultancy Westwood Global Energy Group said U.S. output would climb
even faster than implied by the rising rig count, which has jumped from 316 rigs
in mid-2016 to 738 last week, as producers become more productive per well.
"Westwood Global Energy forecasts an 18 percent increase in active rigs in 2018,
but more rapid demand growth in certain service areas as operators focus on
efficiency and delivering more for less," the consultancy said.
FGE, another consultancy, also warned that though supply disruptions could lead
to spikes in the oil price next year, the market could slump again towards 2019
if U.S. production continued to soar.
"We see another big rush with (U.S.) production growth of some 1-1.5 million bpd
(barrels per day) in 2018 and 2019," FGE said.
Reflecting rising U.S. oil exports to Asia, U.S. commodity exchange CME Group <CME.O>
said it would list a new futures contract that prices the spread between U.S.
WTI futures and Middle East benchmark Dubai, starting Dec. 18.
(Additional reporting by Keith Wallis; Editing by Dale Hudson, Greg Mahlich)
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