TOKYO • Oil prices edged lower yesterday as investors awaited a meeting of Opec (Organisation of the Petroleum Exporting Countries) and its allies later in the day that was expected to formally agree to more output curbs early next year.
Despite the cuts, Opec stopped short of pledging action beyond March and analysts questioned the impact of the latest curbs.
Brent futures were down 10 US cents, or 0.2 per cent, at US$63.29 by 0730 GMT. West Texas Intermediate futures fell 7 US cents, or 0.1 per cent, to US$58.36 a barrel. They hit US$59.12 a barrel on Thursday, the highest since end-September.
Opec and allies including Russia, a grouping known as Opec+, agreed to more output cuts to avert oversupply early next year as economic growth stagnates amid the United States-China trade war.
The agreement, which needs to be formally adopted, will cut an extra 500,000 barrels per day (bpd) of production, through tighter compliance and some adjustments. The group has been withholding 1.2 million bpd and the increased amount represents about 1.7 per cent of global oil output.
The “decision seems to be more of a housekeeping move that will narrow the gap between their current target and the over-compliance we have seen from the alliance”, said Oanda senior market analyst Edward Moya.
Any price gains from the Opec+ output cuts are likely to benefit US producers not party to any supply reduction agreement. US drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.
“North American shale supply will continue growing even in an environment with lower oil prices,” Norwegian consultancy Rystad Energy said in a note.
Once the powerhouse of the global oil market, Opec now largely reacts to trends outside its control, particularly US oil production, which has doubled to 12 million bpd since 2012.
Opec production cuts have done little to raise crude prices in recent years, largely because of the steady increase in US shale oil production.
US output is projected to increase more slowly next year, but it is expected that nearly one million bpd will reach global markets from Norway, Brazil, Mexico and Guyana.
This month’s Opec meeting has drawn attention because it is the first in which the newly appointed Saudi oil minister, Prince Abdulaziz Salman, is in charge of Saudi energy policy. His chief objective is to firm up oil prices to make the initial public offering of Saudi Aramco as attractive as possible.
Opec currently produces 29.7 million bpd – about 30 per cent of global output – which is 2.6 million bpd fewer than a year ago.