Oil steady as OPEC members gather to discuss output policy
02 June 2016
Crude oil prices extended gains for a third week on Thursday, ahead of an OPEC policy meeting that market fears could propose some restrictions on output after Saudi Arabia, the cartel's most prolific producer, also promised not to flood the oil market with extra barrels.
North Sea Brent crude futures were down 5 cents at $49.67 a barrel by 1127 GMT (7.27 am ET), while benchmark US West Texas Intermediate (WTI) crude futures were down 10 cents at $48.91.
OPEC, however, is headed for a heated debate on production curbs, with Iran insisting on the right to raise output steeply.
With Iran insisting on higher production after years of shutdown and rival Saudi Arabia trying to revive coordinated action or a formal oil output target, Tehran is refusing to cooperate.
Opec now looks set for another showdown between rivals Saudi Arabia and Iran when it meets today in Vienna, with prospects of coordinated action or a formal oil output target almost bleak.
Despite coordinated attempts by Opec, with rising output by Middle Eastern producers, the group's overall production has remained largely flat this year, currently standing at 32.5 million barrels per day (bpd).
Oil production was somewhat capped by disruptions especially in Nigeria, Libya and Venezuela. This, combined with China's slowing economy and overall global manufacturing activity remains a growing concern about the outlook for oil.
Saudi Arabia is already producing very close (or at) maximum capacity and it has no spare production to leverage against Iran, which has enough idle capacity to ramp up.
UAE oil minister Suhail bin Mohammed al-Mazroui said low oil prices were pushing all countries to limit production, whether they say so publicly or not.
Until December 2015, Opec had a ceiling of 30 million bpd - in place since December 2011, although it effectively abandoned individual production quotas years ago.
Any ceiling below 32.5 million bpd would represent an effective cut.
Analysts, however, expect oil prices to rise above $50 per barrel "in the near future" as attacks on oil infrastructure in Nigeria, power outages and payment issues in Venezuela and chaos in Libya rein in total Opec production and curb supplies.
Oil prices crashed to $27 per barrel in January, their lowest in over a decade, but have since recovered to around $50 due to global supply outages.