Singapore: Oil prices edged up Wednesday ahead of a meeting of OPEC members who were expected to discuss a possible increase in output.
Expectations that a weekly US petroleum supply report due later Wednesday would show a small decrease in crude inventories also supported prices.
Light, sweet crude for January delivery added 20 cents to US$88.52 a barrel in electronic trading on the New York Mercantile Exchange, midmorning in Singapore. The contract dropped 99 cents to settle at US$88.32 a barrel Tuesday.
Traders have been reacting to mixed signals about whether the Organization of Petroleum Exporting Countries (OPEC) would decide to increase production during its meeting Wednesday. On Tuesday, crude prices rose and fell throughout the session as differing statements were reported from OPEC delegates arriving in Abu Dhabi, United Arab Emirates, for the meeting.
A number of reports have suggested several OPEC countries are already exceeding their output quotas.
“It’s not whether OPEC raises production or not they already have but it is whether or not they legitimize that overproduction by raising their quotas,” wrote Phil Flynn, an energy analyst with Alaron Trading Co., in a research note.
“US$90 a barrel is the line in sand and if oil is below US$90, like I expect it will be, then OPEC will not raise their quota,” Flynn wrote. “If oil starts driving to above US$90 a barrel then it’s possible that OPEC will raise quota to legitimize over production. But it will not mean any more real barrels of oil.”
Oil prices have dropped about US$10 in one week on the belief that OPEC has all but decided to boost production. But the price drop itself has raised questions about whether oil ministers will follow through.
Recent OPEC comments have been divided, with ministers from Venezuela and Qatar suggesting there’s no need to boost supplies, while ministers from Indonesia, Nigeria and Kuwait say they are still open to increases.
But the Saudis, whose views carry great weight because they are responsible for almost a third of OPEC’s total output, remained publicly uncommitted a day ahead of the meeting.
“All options are open,” Saudi oil minister Ali al-Naimi told reporters Tuesday, adding the group “will look at all the information” before reaching a decision.
Traders are also waiting for the US Department of Energy’s weekly petroleum inventory report, which closely watched in the energy markets as a guidepost for demand.
US crude stockpiles are likely to fall by 800,000 barrels and gasoline stocks to grow by 900,000 barrels, according to an average estimate of analysts surveyed by Dow Jones Newswires.
Refinery use is expected to rise 0.2 percentage point to 89.6% of capacity, according to the survey. Distillate stocks, which include heating oil and diesel fuel, are expected to drop by 300,000 barrels, analysts predict.
In London, January Brent crude futures rose 47 cents to US$90 a barrel on the ICE Futures exchange.
Heating oil futures added 0.30 cent to US$2.5148 a gallon (3.8 liters) while gasoline prices rose 0.51 cent to US$2.2568 a gallon.
Natural gas futures rose 1.2 cents to US$7.167 per 1,000 cubic feet.