Oil prices steadied around $61 a barrel on Tuesday as rising expectations of deeper output cuts from OPEC and its allies were countered by a potential delay to a US-China trade agreement until after the next US presidential election.
Brent futures rose $0.04 to $60.96 a barrel by 1116 GMT while US West Texas Intermediate crude was up $0.08 at $56.04.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are discussing a plan to increase an existing supply cut of 1.2 million barrels per day (bpd) by a further 400,000 bpd and extend the pact until June, two sources familiar with the matter said. Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the initial public offering of state-owned Saudi Aramco, the sources said.
US President Donald Trump said that a trade agreement with China might have to wait until after the US presidential election next November, denting hopes of a quick resolution to a dispute that has weighed on the world economy. I have no deadline, no. In some ways I think it’s better to wait until after the election, Trump told reporters in London, where he was due to attend a meeting of NATO leaders. Russian Energy Minister Alexander Novak on Tuesday said he expected this week’s meeting to be constructive but added that Moscow had yet to finalise its position.
Vagit Alekperov, CEO of Russia’s second-biggest oil producer, Lukoil, said it would not be expedient to deepen production cuts in the winter, especially for Russia. Goldman Sachs on Monday said that OPEC+ is likely to extend output curbs through June but expects the “uneventful” three-month extension to provide little support to prices. The factors behind this view included a large increase in production from legacy non-OPEC projects and an as yet uncertain outlook for demand growth, it added.
The investment bank said it expects Brent to trade around $60 a barrel in 2020 in the absence of geopolitical shocks. OPEC ministers will meet in Vienna on Thursday and the wider OPEC+ group will gather on Friday. While OPEC may cut output, US producers have been only too happy to meet any market shortfalls, with production setting successive records. Growth into 2020, though, could range between 100,000 bpd and 1 million bpd.