Oil prices edge higher as Saudi pushes for further supply cuts

Published December 3, 2019
Sources say Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the initial public offering of state-owned Saudi Aramco.— AFP/File
Sources say Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the initial public offering of state-owned Saudi Aramco.— AFP/File

Oil prices edged higher on rising expectations of deeper output cuts when OPEC and its allies meet this week, although scepticism about a deal among some analysts limited the gains.

Brent futures rose 43 cents to $61.35 a barrel by 0924 GMT on Tuesday. US West Texas Intermediate crude was up 44 cents at $56.40 a barrel.

The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, 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 of state-owned Saudi Aramco, the sources said.

But it remains unclear if there is consensus within the group to achieve a deeper cut.

Russian Energy Minister Alexander Novak said on Tuesday he expected this week's meeting to be constructive, but added that Moscow had yet to finalise its position.

Vagit Alekperov, CEO of Russia's oil producer Lukoil said it would not be expedient to deepen production cuts in the winter season, especially for Russia.

Goldman Sachs said on Monday that OPEC+ will likely extend output curbs through June, but expects the “uneventful” three-month extension to provide little support to prices.

The factors behind this view included a large increase in production from legacy non-OPEC projects and a still uncertain outlook for demand growth, it added.

The investment bank said it expected Brent to trade around $60 a barrel in 2020, “absent new growth or geopolitical shocks”.

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 US economic data.

A senior advisor to President Donald Trump said a US-China trade deal was still possible before the end of the year, adding that the first phase was being put to paper, although the talks have dragged on for weeks.

While OPEC may cut output, US producers have been only too happy to meet any market shortfalls, with production setting successive records. Growth into 2020, though, may range between 100,000 bpd and 1 million bpd.

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