Oil Hovers Near $50 Amid OPEC's Mixed Signals on Deal Extension

Updated on
  • Kuwait, Algeria ministers send conflicting messages on talks
  • Technical committee recommends informal monitoring of exports

Oil got stuck in a gridlock after OPEC ministers sent mixed signals about what’s on the table for the cartel’s meeting on Friday.

Futures hovered above $50 a barrel, ending the session in New York on a slight drop. Ministers who will gather in Vienna appear to be at loggerheads over whether now is the time to talk about prolonging or deepening a production-cut agreement set to expire in March. Kuwaiti Oil Minister Issam Almarzooq said the group won’t look at an extension of the deal this week, while Algeria’s energy minister said an extension will be discussed.

“There are some rumors around the market that they may either make a call or look to implement an extension of the cutback plan, so that’s proving somewhat supportive, although to the extent that they don’t, prices could get punished,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. The market’s “in wait-and-see mode now.”

Oil’s price gains have been capped by rising U.S. shale output that threatens to hinder supply curbs by the Organization of Petroleum Exporting Countries. The group’s Joint Technical Committee, which met on Wednesday to assess compliance to the output-reduction deal, recommended ministers consider informal monitoring of exports in addition to production, according to two delegates.

Russia Energy Minister Alexander Novak said in Vienna that it’s still too early to talk specifics on an OPEC deal extension. Novak also said Russia has made deeper cuts to its oil output than pledged.

Ministers “may try to lay out some preliminary numbers, but I don’t think you’ll see anything concrete come out,” Paul Crovo, a Philadelphia-based oil and equity analyst at PNC Capital Advisors LLC, said by telephone. Investors “will be trying to read into what they say.”

West Texas Intermediate for November delivery fell 14 cents to settle at $50.55 a barrel on the New York Mercantile Exchange. Total volume traded was about 26 percent below the 100-day average. The October contract expired Wednesday.

See also: Oil Traders Empty Key Crude Storage Hub as Demand Booms

Brent for November settlement rose 14 cents to end the session at $56.43 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.88 to WTI, the widest gap since 2015.

In the U.S., an Energy Information Administration report Wednesday showed crude inventories expanded by 4.59 million barrels last week, while both gasoline and distillate stockpiles tumbled. Crude production increased for a second week.

Oil-market news:

  • OPEC shipments will decrease to 23.82 million barrels a day in the four weeks to Oct. 7 versus the period to Sept. 9, tanker-tracker Oil Movements said in a weekly report.
  • Analysts and traders are bullish on WTI crude futures, according to a weekly Bloomberg survey.
  • Gulf Coast refiners that spent billions over the last two decades on plants designed specifically to process Venezuela’s cheap, tar-like crude are starting to come home to American light oil.

— With assistance by Rakteem Katakey, and Ben Sharples

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