- Saudi Arabia said to use Vienna meeting to restore group unity
- OPEC talks a ‘victory lap’ after rally, Goldman’s Currie says
Oil closed near $49 a barrel in New York as OPEC delegates said the group would be discussing the reintroduction of output ceilings at Thursday’s meeting in Vienna.
West Texas Intermediate was little changed after rising 6.9 percent in May as supply was curbed by wildfires in Alberta and militant attacks in Nigeria. The Organization of Petroleum Exporting Countries is considering a production cap along with other proposals, and any deal would be signal of group unity but unlikely to affect actual production, delegates said.
"Nobody thought they would do anything this week, so the introduction of a target is a big deal," said Phil Flynn, senior market analyst at Price Futures Group in Chicago. "The introduction of a quota would be the first time in a year and a half that they have done anything that hints at production restraint."
Oil in New York has surged about 85 percent since touching the lowest level since May 2003 in February on signs the global surplus is easing. OPEC will probably stick to its policy of squeezing out rivals by maintaining production as the price rally helps justify the group’s strategy, according to analysts surveyed by Bloomberg.
WTI for July delivery declined 9 cents to close at $49.01 a barrel on the New York Mercantile Exchange. Futures briefly topped $50 Tuesday for the second time this year. Total volume traded was 12 percent below the 100-day average at 4:41 p.m.
Futures slipped from the settlement after the industry-funded American Petroleum Institute was said to report U.S. crude supplies rose 2.35 million barrels last week. WTI traded at $48.88 at 4:41 p.m in New York.
Brent for August settlement dropped 17 cents to $49.72 a barrel on the London-based ICE Futures Europe exchange. The July contract expired Tuesday after slipping 7 cents to $49.69. The global benchmark crude closed at a 23-cent premium to WTI for August delivery.
Saudi Arabia will use this week’s meeting to repair relationships with fellow producers after the failure of an April accord to freeze crude output in Doha, according to the people familiar with the matter. The kingdom’s Minister of Energy Khalid Al-Falih will reassure other members his nation won’t flood the oil market, the people said.
The global oversupply that sent prices tumbling in 2014 and 2015 is correcting itself, United Arab Emirates Oil Minister Suhail Al Mazrouei said Tuesday after arriving in Vienna. “The market will fix itself to a price that is fair,” he said. Nigeria’s minister of state for petroleum resources, Emmanuel Ibe Kachikwu, also said prices are moving “in the right direction.”
"I would call it a victory lap," Jeff Currie, head of commodities research at Goldman Sachs, said in a Bloomberg Television interview. OPEC "successfully engineered a market that rebalanced on its own."
Forecasters including the International Energy Agency and Goldman Sachs agree that the crude glut is starting to dwindle as the Saudi-led approach of pressuring high-cost suppliers finally pays off. There are still signs of division within OPEC, with Venezuelan Energy Minister Eulogio Del Pino saying Wednesday the price recovery has had more to do with unexpected outages than a successful OPEC strategy.
"Near term, the market should trade in the $45-to-$50 range but as we move toward the end of the year, the market should soften again," Currie said. The market will stay in this range due to the "temporary disruptions that have driven the market into a deficit."
Prices dropped as much as 2.7 percent earlier in New York as Canadian oil-sands producers including Suncor Energy Inc. have begun resuming operations. Cooler weather is helping keep the wildfires at bay.
U.S. crude stockpiles, which are near an 87-year high, probably fell by 2.5 million barrels last week, according to a Bloomberg survey conducted before an Energy Information Administration report Thursday. The nation’s crude production dropped for an 11th week to 8.77 million barrels a day in the week ended May 20, EIA data show.
"Oil should grind higher with occasional bumps along the way," said Joe Bozoyan, an equity portfolio manager who focuses on energy at John Hancock in Boston. "The move higher has been driven by supply disruptions. Canadian oil production is coming back but output continues to fall elsewhere."
- Citigroup Inc. said Wednesday that “Vienna could still surprise.” While the number of new faces at the meeting reduces the likelihood of “grand” coordinated action, it also introduces uncertainty, Citi said in a report.
- OPEC has two “credible” candidates for secretary-general, the U.A.E.’s Al Mazrouei said in Vienna, without naming them.
- Iran plans to invite international companies to bid for oilfield development rights in June, a government official said, as the country seeks to revive its energy industry after years of crippling sanctions.