The oil price is holding pretty steady in morning trade Tuesday. While firmer expectations of an extension to the OPEC output cap are supportive, news of higher US output is stopping investors from taking new positions in the commodity.
By 0945 BST the price of Brent crude was 0.64% up at $62.62 per barrel, while WTI crude was 0.48% higher at $56.69.
The minor gains follow a few days of price slips. The move should help to calm the nerves of some oil-related energy companies and investors alike.
Prices little changed on uncertainty
OPEC and a group of non-OPEC oil producers, led by Russia, are currently adhering to an output cap which is in place until March 2018. The cap was introduced to help reduce the global oil glut and also boost prices.
The next OPEC meeting is in Vienna on November 30 and some non-OPEC oil producers are expected to attend, as they have in the past.
Up until recently, analysts and even OPEC members, were confident the current output cap would be extended beyond the March 2018 end-date. Now, however, due to numerous geo-political developments, there is less certainty this will happen.
On balance, though, expectations are that a cap extension will be announced post OPEC meeting. Not least because such action should support prices throughout 2018.
“If the OPEC/non-OPEC cuts continue, the stocks surplus will reduce to just some 50 million barrels above the 5-year average in 3Q 2018 (down from around 140 million barrels above that average now) and prices will hit $65-70 per barrel,” energy consultancy FGE said, according to a Reuters report.
US oil supply
Cancelling out any possible support from an OPEC output cap extension, is news shale oil output from the US is rising.
US oil production is close to record highs. And, analysts anticipate a further increase in the number of active US facilities during 2018. While that will help US oil producers meet demand for their product, it will also likely weigh on prices. Particularly if output rises too quickly.
Earlier this year, OPEC spoke with the US about the requirement for a broader agreement on output. So far, though, it appears no progress has been made on that initial conversation.