Oil slips on OPEC deal uncertainty and rising US inventories
LONDON (Reuters) — Oil prices slipped on Wednesday as doubts set in about Russia's willingness to substantially extend a deal among some of the world's biggest exporters to curb output to help tackle global oversupply and support prices.
Brent crude futures were down 22 cents on the day at $63.39/bbl by 1147 GMT, while US light crude fell 25 cents to $57.74/bbl.
Oil ministers from the Organization of the Petroleum Exporting Countries and other producers began gathering in Vienna on Wednesday to discuss extending a deal that has so far reduced crude oil production by 1.8 MMbpd and helped boost oil prices by 40% since the middle of the year.
The deal between most OPEC members and other major exporters including Russia is scheduled to expire in March 2018.
Producers at a meeting on Thursday are expected to agree to extend the agreement, but the length of the extension remains an open question. This has kept the market on its toes.
"Tomorrow's long-awaited meeting was meant to be a formality," said Stephen Brennock, analyst at broker PVM. "This narrative has, however, not gone according to the script and the scene is set for tougher-than-expected policy talks."
OPEC sources said on Tuesday that though the Vienna meeting would see supply cuts extended to the end of 2018, an option to review the deal in June would be included.
Reluctance to a robust extension has been driven mainly by Russia and its concerns that a major extension could lead the market to overheat.
Moscow fears that a strong price rally off the back of such a move could give an unsustainable boost to the rouble, one that harms Russian exports.
It could also trigger an increase in US production, which has already been rising significantly and offsetting the OPEC-led cuts to some extent.
A report from the American Petroleum Institute (API) on Tuesday showed a weekly rise in US crude inventories of 1.8 MMbbl, confounding expectations for a 2.3-MMbbl drop.
"The market had been looking forward to a supportive number due to the pipeline disruption from Canada," said Ole Hansen, senior manager at Saxo Bank. "But nevertheless the overall level of inventory still managed to climb."
A price rise generated by the shutdown of the Keystone pipeline, which supplies Canadian crude to the United States, turned out to be short-lived, with an announcement on Tuesday of a gradual restart to operations.
Reporting by Henning Gloystein and Polina Ivanova; editing by Louise Heavens and Jason Neely
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