Oil rebounded from the week’s lows to close above $50 a barrel on Thursday as market watchers focused on an upcoming weekend meeting between OPEC and non-OPEC producers that may result in an agreement to cut crude output further.
Brent and U.S. oil prices gained support early 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.
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.
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.
Late in the morning, Brent flipped into negative territory while U.S. prices pared gains briefly after reports that Russia sees a risk that the meeting could be moved due to questions that have come up. A Russian energy ministry spokeswoman, however, said the meeting would continue as planned.
Speaking at a conference in New York, former OPEC Secretary General Abdalla El-Badri said that a non-OPEC production cut of about 600,000 barrels per day (bpd) was “a must.”
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.
Given the rally to $50 a barrel, non-OPEC members may not be persuaded to cut output, said Tim Evans, energy futures specialist at Citigroup.
“Further effective cooperation between oil producers seems unlikely in our view, as OPEC and Russia have already agreed on policy, reducing the leverage they have with other countries in our view,” he said in a note.
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).