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Oil futures pulled back modestly Friday from a two-month high, but remained on track for a weekly rise on growing expectations the Organization of the Petroleum Exporting Countries and its allies will agree to extend production cuts when they meet next month.
West Texas Intermediate crude for January delivery CLF20, -0.10% fell 33 cents, or 0.6%, to $58.25 a barrel on the New York Mercantile Exchange, while January Brent crude BRNF20, +0.13%, the global benchmark, was off 21 cents, or 0.3%, at $63.76 a barrel.
WTI, the U.S. benchmark, remains on track for a 0.9% weekly rise, while Brent, the global benchmark, is headed for a 0.8% gain. Both grades ended Thursday at their highest levels since Sept. 23.
“We are interpreting this pickup in oil prices as a refocus on supply-side issues in the lead up to the OPEC meeting in December,” said Jasper Lawler, head of research at London Capital Group, in a note.
The rebound is in line with news reports this week indicating OPEC and its allies, particularly Russia, are expected to agree to extend existing output curbs of 1.2 million barrels a day, scheduled to end in March, through mid-2020, when they meet in Vienna in December.
“We think an extension was already priced in so markets might be positioning for deeper output cuts,” Lawler said.
Indeed, others argued that a mere extension of current curbs would fail to support the market amid what they see as signs of oversupply.
“Nothing has been decided as yet and negotiations tend to heat up closer to meeting time. OPEC+ could still make further production cuts; however the rhetoric from energy ministers, the OPEC secretary-general, Russian oil companies, et al, all point to maintaining the status quo,” said Jason Gammel, analyst at Jefferies. “We thus estimate that the market will be oversupplied by [900,000 barrels a day] in 1H20, which in turn skews risk to the downside on our 1H20 $58 a barrel Brent price forecast.”
In other energy trading, December gasoline RBZ19, -0.22% fell 0.4% to $1.6983 a gallon, while December heating oil HOZ19, +0.43% edged up 0.1% to $1.9461 a gallon.
December natural-gas futures NGZ19, +1.91% jumped 1.6% to $2.608 per million British thermal units.
