LONDON (Reuters) – Oil prices fell on Tuesday on uncertainty over the outcome of a key OPEC meeting this week due to decide on production policy for the next year.
Brent crude oil LCOc1 fell 58 cents on the day to $63.26 a barrel by 1240 GMT. U.S. light crude CLc1 was 45 cents lower at $57.66, after falling 1.4 percent in the last session.
Members of the Organization of the Petroleum Exporting Countries and other key producers, including Russia, meet on Nov. 30 to discuss whether to continue to limit production in an effort to drain global inventories to help push up prices.
They cut production by 1.8 million barrels per day (bpd) in January and agreed to hold down output until March. The market had expected OPEC to extend the limits by another six to nine months, but this is now less certain.
“We believe that the outcome of this meeting is much more uncertain than usual,” Goldman Sachs analysts said, suggesting that the oil market may have been wrong to assume that OPEC would agree to restrict output until the end of 2018.
“We view risks to oil prices as skewed to the downside this week as we believe that current prices, time spreads and positioning already reflect a high probability of a nine-month extension,” the Goldman analysts said.
Doubts have emerged over whether Russia will agree to join the OPEC in an extension of production curbs beyond March.
Russia’s economy was negatively affected in October by the ongoing curbs, which saw Moscow agree to cut output by 300,000 bpd, Economy Minister Maxim Oreshkin said.
U.S. crude touched $59.05 a barrel on Friday, its highest since mid-2015, fueled by the outage of the Keystone pipeline, one of Canada’s main crude export routes to the United States.
But TransCanada Corp (TRP.TO) this week said it would restart the 590,000 barrel-per-day pipeline at reduced pressure on Tuesday after getting approval from U.S. regulators.
“This bearish development adds to the underlying unease surrounding the outcome of Thursday’s OPEC meeting,” PVM Oil Associates analysts said in a report.
Consultancy Wood Mackenzie said it looked as if producers had nearly concluded an agreement to extend cuts until the end of next year.
“(But) if the production cut agreement ends in March 2018, our forecast shows there would be a projected 2.4 million bpd year-on-year increase in world oil supply for 2018,” said Ann-Louise Hittle, vice president for macro oils.
Additional reporting by Amanda Cooper in London and Keith Wallis in Singapore; Editing by Louise Heavens