London: Oil slipped below $47 a barrel on Tuesday after reports Saudi Arabia was keeping supply allocations to customers steady for April, suggesting Opec may maintain existing production output quotas on Sunday.
The Organization of the Petroleum Exporting Countries meets in Vienna on 15 March and must decide whether to cut production further in an attempt to support oil prices that have fallen by around 70 percent from a peak of almost $150 last year.
Opec’s largest member, Saudi Arabia, notified customers of largely steady supplies for April from March, traders said on Tuesday, a day after a Saudi-owned newspaper said the world’s top exporter wanted stricter compliance with existing curbs before considering more cuts.
Dealers were also looking ahead to weekly US oil stocks data expected to show another fall in inventories.
US light crude for April delivery fell 28 cents a barrel to $46.79 by 3:15pm having gained more than 3% on Monday, on Opec’s hints of further cuts and after a naval incident between the United States and China.
London Brent crude was up 5 cents at $44.18 after settling 72 cents lower on Monday at $44.13.
Oil traders and analysts said Saudi Arabia appeared to be hinting that there would be no change in production quotas at the Vienna Opec meeting.
“This is evidence that Opec is not going to cut,” said Sintje Diek, oil analyst at HSH Nordbank in Hamburg. “Nevertheless, I would not completely exclude that they will announce another production cut on Sunday.”
Opec has already promised to cut 4.2 million barrels per day (bpd) of production from its output levels since September.
Opec Secretary-General Abdullah al-Badri said on Monday the 12-member producer group would consider reducing output again at the meeting. Opec will predict 2009 demand for its oil will be 1 million barrels per day (bpd) lower than the previous year in a monthly report due on Friday, Badri also said.
The US Energy Information Administration will release later on Tuesday its monthly short-term energy outlook, which will likely contain a cut in its demand forecast.
The EIA’s forecast is the first of three widely watched reports on world petroleum use to be released this week. The EIA has lowered its estimate for 2009 global oil demand in 10 out of its last 13 monthly forecasts.
Compliance with existing curbs is very high at more than 80 percent, according to independent observers, but that still leaves room for more discipline.
Industry group the American Petroleum Institute will release at 2am its weekly US stocks data, which analysts forecast would show a bullish 400,000 barrel decline in crude stocks as inventories fall further from February’s record highs.
Last week, crude stocks fell by an unexpected 700,000 barrels.
Analysts polled also expected an 800,000 barrel fall in gasoline inventories and a 200,000 barrel rise in distillates stocks.
The US Energy Information Administration will release its weekly data on Wednesday.