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Oil prices turn positive as US crude stockpiles fall by 3.6 million barrels, more than expected

CNBC

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Rusted out ‘pump-jacks’ in the oil town of Luling, Texas.

Oil prices edged higher on Wednesday after government data showed U.S. crude inventories fell more than expected after an industry report had indicated a surprise build in fuel stocks.

U.S. commercial crude inventories fell by 3.6 million barrels to a total of 528.7 million barrels in the week through April 21, the Energy Information Administration said. The decline came as refineries hiked output and despite a 515,000 barrels-per-day rise in net U.S. crude imports.

U.S. inventory data issued late on Tuesday by the American Petroleum Institute (API) showed crude stockpiles rose 897,000 barrels, defying expectations of a fall of 1.7 million barrels.

U.S. West Texas Intermediate (WTI) was trading up 22 cents at $49.78 per barrel by 10:38 a.m. ET (1438 GMT), after gaining 0.7 percent in the previous session.

North Sea Brent crude, the international benchmark for oil prices, pared losses to trade down 2 cents at $52.08 per barrel. Brent is about 7 percent below its April peak.

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The line in the sand for crude: Trader

The line in the sand for crude: Trader   

Offsetting the headline crude stockpile data was a rise in fuel inventories, unusual for this time of the year.

Gasoline stocks rose by 3.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 1 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, rose by 2.7 million barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.

U.S. gasoline futures were down 0.7 percent on Wednesday, paring earlier losses and turning positive year to date.

Analysts say lackluster gasoline demand could leave stockpiles of the fuel elevated even through the summer driving season, when consumption surges. That would potentially hurt demand for feedstock crude oil.

Brent and WTI also found support from Saudi Energy Minister Khalid al-Falih, who said he was interested in talks between the Organization of the Petroleum Exporting Countries and non-OPEC producers to stabilize oil prices.

Man who called oil price collapse now sees this

Man who called oil price collapse now sees this   

OPEC and a handful of big producers, including Russia, pledged to cut output by 1.8 million barrels per day (bpd) in the first half of 2017. Gulf and some other producers have indicated cuts could be extended to the end of 2017. An extension will be discussed when OPEC meets in May.

“The market remains heavy with doubts about OPEC’s ability to achieve a successful extension of the current deal with Russia adopting a lukewarm ‘wait and see’ approach,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The average value of the Brent crude forward curve has fallen by over $5 per barrel since the start of the year, when the OPEC-led supply cut started.

The slump in Brent is a result of record crude oil volumes in circulation on ships around the world. Thomson Reuters Eikon shipping data showed 50 million barrels per day were booked for shipment on tankers this month, up 10 percent since December.

— CNBC’s Tom DiChristopher contributed to this report.

Oil dives, sending U.S. crude below $50 for first time in two weeks

REUTERS

By Julia Simon | NEW YORK

NEW YORK Oil prices tumbled more than 2 percent on Friday, notching the biggest weekly decline in more than a month on mounting evidence that U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.

Brent futures LCOc1 settled at $51.96 a barrel, down $1.03, or 2 percent at the market’s close. U.S. crude futures CLc1 ended at $49.62 a barrel, down 2.2 percent, or $1.09.

Volumes were heavy, with more than 665,000 WTI futures changing hands, surpassing the daily average of 525,000 contracts.

For the week, Brent fell 7 percent, while U.S. crude lost 6.7 percent. It was the largest percentage drop for both benchmarks since the week of March 10, when rising concern about the supply glut undermined big bets on an oil rally.

Those speculative bets have been on the rise again. On Friday, the U.S. Commodities Future Trading Commission (CFTC) showed total long positions in U.S. crude rose in the week to April 18 to their highest in more than a month at 355,077 contracts. But oil has sagged in recent days, much as it did in March.

Many in the market still expect the Organization of the Petroleum Exporting Countries (OPEC) to renew its production cuts for another six months. On Friday an OPEC and non-OPEC member technical committee recommended extending cuts of almost 1.8 million barrels per day (bpd) at the upcoming May 25 meeting.

Still, shipment data shows more oil transiting world oceans than when cuts were put in place.

“The reason that we’re seeing the selloff today and really for this week has been related to the fact that we’re seeing higher waterborne imports arriving from the Middle East,” said Matt Smith, director of commodity research at Clipperdata.

“We should continue to remain well supplied at least over the next few weeks.”

In addition, Russia’s Energy Minister Alexander Novak declined to say whether Russia would adhere to an extension, saying global stocks were declining.

Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB, does not expect OPEC to roll over its cuts, saying it could potentially leave the cartel vulnerable to “more stimulus of the U.S. shale oil sector.”

U.S. production, already at its highest since August 2015, looks likely to keep rising. U.S. drillers added rigs for a 14th consecutive week, Baker Hughes said on Friday.

(Additional reporting by Ron Bousso in London, Henning Gloystein in Singapore; Editing by David Gregorio and Chizu Nomiyama)

Oil near flat in strong week for crude

The Economic Times

Energy services firm Baker Hughes said on Thursday that drillers added 11 oil rigs in the week to April 13, bringing the total count up to 683. The number of U.S. rigs has increased for 13 consecutive weeks.

Oil near flat in strong week for crudeBy Julia Simon

NEW YORK: Oil prices were little changed in modest volume on Thursday, during a week in which crude benchmarks recouped more of March’s losses on increased hopes world supply and demand were nearing balance.

At the same time, the U.S. oil rig count rose to its highest level in two years, threatening the rebalancing of markets.

Energy services firm Baker Hughes said on Thursday that drillers added 11 oil rigs in the week to April 13, bringing the total count up to 683. The number of U.S. rigs has increased for 13 consecutive weeks.

The market has been oversupplied since mid-2014, prompting members of the Organization of the Petroleum Exporting Countries and some non-OPEC producers to agree to cut output in the first six months of 2017.

With the increasing rig count pointing to rising supply, Tony Headrick, energy market analyst at CHS Hedging, said OPEC would be watching.

“Ultimately OPEC is viewing it as a point of discussion in terms of whether or not they look to extend cuts,” Headrick said.

OPEC meets on May 25 to consider extending the cuts beyond June. Saudi Arabia, Kuwait and most other OPEC members are leaning towards this if agreement is reached with other producers, OPEC sources told Reuters last month.

OPEC data showed members of the group had cut March output beyond the level they had promised.

Benchmark Brent crude futures settled up 3 cents to $55.89 a barrel after touching a one-month high on Wednesday. U.S. West Texas Intermediate crude futures settled up 7 cents at $53.18 a barrel. Both benchmarks were set for a third consecutive weekly gain. About 431,000 U.S. crude contracts changed hands Thursday, short of the 531,000-contract average over the past 200 trading days.

The Paris-based International Energy Agency (IEA) said on Thursday that supply and demand in the global oil market were close to matching after a fall in stockpiles in developed countries in March.

The IEA said oil stocks in the Organisation for Economic Cooperation and Development industrialized countries fell by 17.2 million barrels in March, although inventories were still 300 million barrels above the five-year average.

“It can be argued confidently that the market is already very close to balance,” the agency said in its monthly report.

The IEA trimmed its oil demand growth forecast for 2017 by 40,000 barrels per day and warned that its revised level of 1.3 million barrels per day “could prove optimistic.” (Additional reporting by David Gaffen in New York, Karolin Schaps in London and Naveen Thukral in Singapore; Editing by

Oil settles at $48.04

CNBC

Reuters

Oil settles at $48.04, down 20 cents, as US crude stockpiles swell

Oil

Lucy Nicholson | Reuters

Oil prices recouped much of their losses after sliding to almost four-month lows on Wednesday after data showed U.S. crude inventories rising faster than expected, piling pressure on OPEC to extend output cuts beyond June.

The U.S. Energy Information Administration (EIA) said U.S. inventories climbed by almost 5 million barrels to 533.1 million last week, far outpacing forecasts for an increase of 2.8 million.

“A persistent increase in U.S. oil production, together with a rise in imports from Canada, contributed towards a large build in crude oil inventories,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

“The market remains nervous about rising U.S. production, which is also reducing the effectiveness of output cuts by the OPEC and some non-OPEC countries,” Kumar added.

A close look at close oil sentiment

A close look at close oil sentiment   

Global benchmark Brent crude futures for May delivery were down 31 cents at $50.65 a barrel by 2:33 p.m. EDT (1833 GMT). The contract fell as low as $49.71.

On its first day as the front-month, U.S. West Texas Intermediate (WTI) crude futures for May settled 20 cents lower at $48.04 per barrel. The session low was $47.01.

Both benchmarks hit their lowest since Nov. 30 when OPEC countries agreed to cut output, and both remained in technically oversold territory. WTI was oversold for the third day in a row, Brent for the second.

A deal between the Organization of the Petroleum Exporting Countries and some non-OPEC producers to reduce output by 1.8 million barrels per day (bpd) in the first half of 2017 has done little to reduce bulging global oil stockpiles.

OPEC, which sources say is leaning toward extending cuts, has broadly delivered on pledged reductions, but non-OPEC states have yet to cut fully in line with commitments.

Trader sees oil reversing course for a rally

Trader sees oil reversing course for a rally   

“OPEC has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling,” said Ole Hansen, head of commodity strategy at Saxo Bank.

U.S. shale oil producers have been adding rigs, boosting the country’s weekly oil production to about 9.1 million bpd for the week ended March 10 from an average 8.9 million bpd for 2016, according to U.S. data.

“OPEC’s market intervention has not yet resulted in significant visible inventory drawdowns, and the financial markets have lost patience,” U.S. bank Jefferies said in a note.

But the bank said the market was undersupplied and, if OPEC extended cuts into the second half, inventories would draw down and prices recover above $60 in the fourth quarter.

However, it said U.S. crude production was expected to grow by 360,000 bpd in 2017 and 1 million bpd in 2018, and a price recovery could spur more U.S. shale activity.

Crude oil – Too non-volatile to be true

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut.

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Crude oil – Too non-volatile to be true

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut.

Ravindra Rao

AVP- Commodity Research, AnandRathi | Capital Expertise: Commodities

Uncertainty continues as OPEC output and rising US rig-count would be the driving force for oil in 2017. Ever since the Organization of Petroleum Exporting Countries sealed an internal deal as well as one with a major non-OPEC, Russia, to cut production from 1st January to June 2017 to support falling prices, WTI prices have been steadily rising. In fact, from the date of the Vienna meet, 29th November 2016, oil has risen 23%. The bulls and bears are now fighting near $55 to get a grip on oil. The confusing thing is that, since January 2017, oil is trading within a tight range of $50 and $54. OPEC claims 86% of deal compliance has been achieved till 22nd February. There is no news of any OPEC member ditching the deal. On the other hand, the US rig-count is increasing due to rising WTI prices. This is something the market expected. Rising WTI prices render US shale-oil drilling financially viable, and every week the EIA’s report shows the rig-count rising (see chart below). The US rig-count (shown by the white line) has gone up since May 2016 to 602 on 24th February.

Because of the rising number of US oil rigs, total inventories on 17th February hit a record 518.6 million barrels according to the EIA. This puts considerable pressure on oil, though bears have been disappointed. The reason is OPEC’s commitment to bring price stability to the oil market. Last week, OPEC immediately came out in rescue of oil as the former showed readiness to extend the output-cut programme to H2 2017 and even to deepen cuts if necessary. So, once again bulls got active.
According to OPEC’s latest report, the club and its partners have reached 86% of their agreed cuts. Crude imports by OPEC’s Saudi Arabia decreased by 393,000 barrels a day last week to 1.06 million, according to preliminary EIA data for week ending 17th February. U.S. weekly imports of Saudi crude fell 27% to the lowest since December. OPEC production and the pace of U.S. drilling in 2017 would be the most significant drivers of crude oil balances and prices. The ambiguity surrounding the OPEC production accord has added volatility to oil prices. Besides, a more optimistic commentary from U.S. management teams implies more stable output, with a possible return to volume growth. Even Russian production heading into next year is high. Although global demand may have improved, the pace is unsteady.

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut. Oil has been bound to the tightest price range in more than a decade, yet hedge funds have never been so confident it would eventually rally. The only thing is OPEC will have to keep production low once the accord expires in June. The market may tank once June arrives and OPEC decides not to extend the deal. However, before that, we expect the positive momentum to continue on track. Recently, the Iranian Oil Minister said that an oil rally above $60 a barrel would ultimately hurt OPEC because it would spur competitors to boost production and trigger a medium-term price drop. The US recently imposed new sanctions on Iran after the latter’s missile test recently. The US administration said that Iran’s continuing support for terrorism and development of its ballistic missile programme poses a threat to the world. The Iran government claims this is baseless and provocative. If such tension rises in coming sessions, we may see a spike in oil. Sentiment now supports oil prices. From the day OEPC started cutting output (1st January), prices have comfortably held above $50. As long as the psychological level of $50 is not breached, we are upbeat for March.

The author is Head – Commodity Research & Advisory at Anand Rathi Commodities

Oil in a dangerous zone

CNCB

Why oil could now be in a ‘danger zone’

Crude oil has slumped over 2 percent this year and could see more pain ahead if OPEC does not stick to production cuts it agreed upon in December.

“I think oil is in a very dangerous zone now precisely because demand is not there,” Boris Schlossberg, BK Asset Management’s managing director of foreign exchange strategy, said Wednesday on CNBC’s “Power Lunch.”
A build in crude oil inventory Wednesday as reported by the Energy Information Administration in fact sent oil higher, settling up 17 cents to $52.34.

“The irony of this whole thing is that OPEC cuts are holding, but the demand is not there. And the longer oil wallows at this $52 level, the more likely it’s actually going to go to the downside. And if it trips to $50 a barrel stops, I think it could really tumble very quickly. So I think we’re in a perilous territory,” Schlossberg said, adding that he wouldn’t be long crude oil at this juncture.

OPEC agreed in December for the first time since 2008 to cut output by 1.2 million barrels per day.

Indeed, oil has traded in a range of roughly $50 to $55 per barrel, said David Seaburg, head of sales trading at Cowen & Company. But he has a more bullish forecast.

“I think from a trading perspective here for the near term, it looks like it’s a level you probably want to step in and take a look from the long side,” Seaburg said Wednesday on CNBC’s “Power Lunch.”

Seaburg said he’d need to see more government data in coming weeks to see if the OPEC agreement is holding, but he cited hedge funds’ extreme positioning in crude oil as a positive for crude.

He said the fact that crude oil held up in Wednesday trading despite the build in inventory was a bullish near-term signal in the face of crowded long positions in the space. He said that meant investors are comfortable with where oil will be in the next three to six months. “They’re comfortable with that, therefore you probably get a trade here I think for the near-term to the upside,” he said.

The XLE, a popular energy exchange-traded fund that tends to rise and fall with the price of crude oil, is down more than 4 percent this year. ConocoPhillips, one constituent in the XLE, is set to break out of a range in which it has traded since December, said Andrew Keene of AlphaShark.com.

After seeing some unusual options activity from an institutional buyer of the April 52.5 calls (which would imply a rally of nearly 6 percent by April expiration) Keene said he would buy the COP April 52.5/55 call spread for 60 cents, or $60 per options spread.

Oil rises above $50

Oil rises above $50 despite doubts over OPEC output cut

By Sabina Zawadzki | LONDON

LONDON Oil rebounded from the week’s lows to stabilize above $50 a barrel on Thursday as market watchers focused on a weekend meeting of OPEC and non-OPEC producers that may result in an agreement to cut crude output further.

Brent and U.S. oil prices gained support earlier from a slightly weaker dollar, but the U.S. currency turned positive as the euro fell on the European Central Bank’s decision to extend but reduce its bond-buying program.

Oil producers meet in Vienna on Saturday to see whether those outside the Organization of the Petroleum Exporting Countries will cut production to help erase a global supply glut that has depressed prices for more than two years.

OPEC has agreed to slash production by 1.2 million barrels per day (bpd) in the first half of 2017, a deal that bolstered crude futures despite doubts over whether the amount was enough and whether the cuts would be effectively implemented.

Brent was up 50 cents at $53.50 a barrel by 1400 GMT. U.S. light crude rose 50 cents to $50.27.

Both benchmarks have fallen more than $2 a barrel from highs reached on Monday when investors bought heavily in the wake of the OPEC deal.

Non-OPEC Russia has signaled it was ready to cut production by 300,000 bpd and on Thursday Azerbaijan said it would come to Vienna armed with proposals for its own reduction.

Nevertheless, some analysts suggest the promised reduction in crude oil production may be insufficient to dent global oversupply and rebalance markets.

“Optimism over the OPEC cut decision has eroded a bit,” said SEB Chief Commodities Analyst Bjarne Schieldrop in Oslo.

“The devil will be in the details.”

Stocks data on Wednesday provided little guidance on the state of the U.S. oil market.

U.S. crude oil inventories dropped 2.4 million barrels in the week to Dec. 2, compared with analyst expectations for a draw of 1 million barrels.

But stocks at the Cushing, Oklahoma delivery hub for U.S. crude futures increased by 3.8 million barrels, the most since 2009, according to the U.S. Energy Information Administration (EIA).

(Additional reporting by Christopher Johnson in London, Jane Chung in Seoul and Keith Wallis in Singapore; Editing by Dale Hudson)

Crude Oil Futures – Weekly Outlook: December 5 – 9

© Reuters.  Oil prices surge after OPEC agrees on first oputput cut since 2008© Reuters. Oil prices surge after OPEC agrees on first oputput cut since 2008

Investing.com – Oil prices rose for a third day on Friday, settling above $51 a barrel after the Organization of the Petroleum Exporting Countries reached an agreement to cut output for the first time in eight years in order to reduce a global supply glut.

U.S. crude oil settled up 63 cents or 1.23% at $51.69 a barrel from its previous close on the New York Mercantile Exchange. U.S crude ended the week with a gain of 14%, the largest weekly percentage gain since early 2011.

Global benchmark Brent futures were at $54.43 a barrel, up 49 cents or 0.91% on London’s ICE Futures Exchange and rose nearly 15% for the week, the biggest weekly percentage gain since early 2009.

Oil prices surged after OPEC agreed on its first production cut since 2008, aimed at reining in massive oversupply that has seen prices more than halve since mid-2014.

The deal will see output cut by 1.2 million bpd from January 2017. The agreement will be reassessed after six months with an option to extend for another six months.

The 14-member cartel is responsible for a third of global oil production, or 33.6 million barrels per day.

The agreement also included coordinated action with non-OPEC members, who are expected to decrease production by 600,000 barrels a day.

Russia has said it will cut production by 300,000 barrels a day.

But analysts said that the cuts are likely to cause other producers, especially U.S. shale drillers, to increase output.

Analysts are also doubtful over how the agreement will be enforced, as OPEC has no authority to make its members comply.

In the week ahead, markets will focus their attention on the implementation and impact of the OPEC agreement. Traders will also be watching U.S. stockpile data on Tuesday and Wednesday for fresh supply-and-demand signals.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Tuesday, December 6

The American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies.

Wednesday, December 7

The U.S. Energy Information Administration is to release weekly data on oil and gasoline stockpiles.

Friday, December 9

Baker Hughes will release weekly data on the U.S. oil rig count.

Saturday, December 10

OPEC is to hold a meeting with non-OPEC members in Vienna to finalize the details of its oil output cut agreement.

Crude Oil Down Again

US crude settles down 3.9% at $45.23 on doubts over OPEC output cuts

CNBC

 

OPEC technical teams fail to reach output deal -Report

OPEC technical teams fail to reach output deal -Report   

Oil prices fell as much as 4 percent on Tuesday on signs leading oil exporters in OPEC were struggling to agree on a deal to cut production to reduce global oversupply.

Brent crude oil was down $1.87, or 3.9 percent, a barrel at $46.37 by 2:38 p.m. ET. U.S. light crude oil settled down $1.85, or 3.9 percent, at $45.23 a barrel.

The Organization of the Petroleum Exporting Countries will meet in Vienna on Wednesday aiming to implement a deal outlined in September to cut output by around 1 million barrels per day (bpd), from around 33.82 million bpd in October.

But Iran and Iraq were resisting pressure from Saudi Arabia to curtail oil production, making it hard for OPEC to reach an agreement. That has led some analysts to suggest the meeting may fail to reach a deal or produce one that is unworkable.

OPEC deal or no deal could go up until last minute

OPEC deal negotiations could go up until the last minute: Analyst   

“The inability to arrive at a framework for a reasonable agreement after 2½ months of Saudi driven discussions strongly suggests any formal communique to restrain output will be a watered down version,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

Ritterbusch, however, said he believes OPEC had a better than 50 percent chance of reaching an agreement, which should offer some near-term price relief. He noted the burden of actual curtailments would likely fall on the Persian Gulf producers, especially the Saudis.

Documents prepared for a ministerial OPEC meeting on Wednesday propose the group cut production by 1.2 million bpd from October levels, an OPEC source familiar with the papers said.

The papers for the meeting also propose Saudi Arabia reduce production to 10.07 million bpd from 10.54 million bpd in October and that Iran freeze output at 3.797 million bpd, according to the source.

Iran’s oil minister earlier on Tuesday said the country was prepared to leave its oil production at levels to which OPEC had agreed at its September meeting in Algeria.

OPEC, which accounts for a third of global oil production, agreed in September to cap output at around 32.5-33.0 million barrels per day versus the current 33.64 million bpd to prop up oil prices, which have halved since mid-2014.

OPEC said it would exempt Iran, Libya and Nigeria from cuts as their output has been crimped by unrest and sanctions.

Non-OPEC producer Russia confirmed on Tuesday it would not attend the OPEC gathering, but added that a later meeting was possible.

Don't typifiy OPEC meeting as Iran vs. Riadh

Don’t typifiy OPEC meeting as Iran vs. Saudi Arabia: Reporter   

Indonesian Energy Minister Ignasius Jonan said he was not sure OPEC would clinch a deal to limit oil output when it met.

“I don’t know. Let’s see. The feeling today is mixed,” he told reporters when asked about the prospects of a deal.

Intense negotiations would be needed on Wednesday to cement a deal, Goldman Sachs analysts said. If OPEC agreed to cut production to 32.5 million bpd, crude prices would likely rise to the low $50s a barrel, Goldman said.

“If no deal is reached, our expectation of rising (crude) inventories through the first half of 2017 would warrant prices averaging $45 per barrel through next summer,” Goldman said.

In Asia, OPEC’s biggest customer region, oil importers made clear that they would not be happy with an artificial supply cut that hikes prices, and that in case of a cut they would seek more supplies from outside OPEC.

In the United States, analysts polled by Reuters ahead of weekly inventory reports from the American Petroleum Institute (API) industry group later on Tuesday and the U.S. Energy Information Administration (EIA) on Wednesday estimated, on average, that crude stocks increased about 900,000 barrels in the week to Nov. 25..

Oil Prices Climb Ahead of Key OPEC Meeting

The cartel hasn’t yet reached consensus on production cuts, causing volatility

Arriving in Vienna, Iraq Oil Minister Jabar al-Luaibi said Monday that he was confident OPEC would reach an agreement this week. Iran and Iraq, which have previously said they want to keep increasing output, indicated in a Monday private meeting that they would consider holding production steady, according to a person familiar with the matter.

That’s part of what drove prices higher Monday, said John Kilduff, founding partner of Again Capital.

ENLARGE

“Iran and Iraq are holding the key to getting a deal done,” he said. “Their rhetoric counts right now.”

But there have been few indications that OPEC’s members have found a way around the hurdles that have kept them from reaching an accord, even with a strong push by Saudi Arabia. Russia, which isn’t a member of OPEC, has stopped short of saying it would curtail output.

Still, many market participants believe the stakes are too high for OPEC members to fail to reach a deal. Oil prices last month climbed above $50 after the cartel pledged to cut production. Some analysts now fear that U.S. crude could plunge below $40 level if oil ministers leave Vienna empty handed.

One challenge for OPEC is to nail down how much each country will be allowed to produce. Another is enforcing any arrangement when the group has a notoriously poor record of compliance and the fact that some sizeable oil producers, like Nigeria and Libya, are exempt from the negotiations.

OPEC’s output has also continued to climb over the past two months, with many countries pumping more oil even as they discussed freezing or curtailing production. In September, OPEC agreed to target production levels that would have translated into a 200,000 to 700,000 barrel-a-day reduction.

Tariq Zahir, managing member of Tyche Capital Partners, said the group would now have to agree to cut at least 1 million barrels a day to make a meaningful dent in supply.

“I think there’s going to be some kind of a deal done to save face,” Mr. Zahir said. “But you need to have a serious cut.”

Even if OPEC strikes a deal, its impact on prices may be short-lived.

“We may be seeing prices in the low 40s before we see the high 50s,” said Mark Anderle, director of supply and trading at TAC Energy.

Gasoline futures rose 4 cents, or 2.91%, to $1.4127 a gallon. Diesel futures rose 4.28 cents, or 2.91%, to $1.5128 a gallon.