Oil prices static on uncertainty over planned production cut
Oil prices were little changed on Thursday as uncertainty ahead of a planned OPEC-led crude production cut and thin liquidity during the U.S.
Thanksgiving holiday kept traders from making big new bets.Brent crude futures were trading at $49.01 at 0711 GMT, up 6 cents from their last close.U.S. West Texas Intermediate (WTI) crude was at $48.07 per barrel, up 11 cents from their last settlement.
Traders said market activity was low due to the U.S. holiday, and there was a reluctance to take on big price directional bets due to uncertainty about a planned oil production cut, led by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC is due to meet on Nov. 30 to coordinate a cut, potentially together with non-OPEC member Russia, but there is also disagreement within the producer cartel as to which member states should cut and by how much.
Most analysts believe some form of production cut will be agreed, but it is uncertain whether it will be enough to prop up a market that has been dogged by a fuel supply overhang for over two years, resulting in a record three years of falling investments into the sector, according to the International Energy Agency (IEA).
“We expect OPEC will reach an agreement at next week’s biannual meeting in Vienna… If OPEC does successfully reach an agreement, prices are likely to test the year high in Brent of $53 per barrel,” ANZ bank said in a note to clients on Thursday.
But it added that “investor positioning data and price action suggest the market remains unconvinced,” and that net long positions, which would profit from rising prices, were still at lows not seen since oil hit $27 per barrel earlier this year.
IEA Director Fatih Birol told Reuters in Tokyo on Thursday that even if production is cut, prices could soon come back under downward pressure again as the OPEC-led cut would enable U.S. shale oil drillers to massively increase their own output.
Beyond OPEC, traders said the strong U.S.-dollar, which is at levels last seen in 2003 against a basket of other leading currencies, was influencing oil prices.
A strong dollar, in which oil is traded, makes fuel purchases more expensive for countries using other currencies at home, potentially crimping demand.
There were also signs of ongoing oversupply, with China’s gasoline exports soaring over 100 percent compared with this time last year, to 870,000 tonnes, as its refiners churn out more petrol than even China’s huge consumer base can handle.