Oil futures ended on a mixed note Thursday, with U.S. prices settling unchanged for the session and global prices higher, as traders awaited a decision on output from major oil producers, following reports that OPEC and its allies have recommended cutting production by another 500,000 barrels a day.
“Whereas there is no official announcement, and none is expected until after the Friday meeting, there is a clear signal that OPEC members are looking to deepen their cuts by 500,00 [barrels a day],” said Manish Raj, chief financial officer at Velandera Energy.
West Texas Intermediate crude for January delivery
CLF20, 0.05%
on the New York Mercantile Exchange settled flat at $58.43 a barrel on the New York Mercantile Exchange. Prices climbed 4.2% on Wednesday to mark the highest settlement for the contract since Nov. 21, according to Dow Jones Market Data.
February Brent crude
BRNG20, 0.19%
added 39 cents, or 0.6%, to settle at $63.39 a barrel on ICE Futures Europe, after surging 3.6% in the previous session.
A committee of oil producers led by Saudi Arabia and Russia recommended on Thursday that the group deepen their current oil production cuts by 500,000 barrels a day, The Wall Street Journal reported, citing officials from the Organization of the Petroleum Exporting Countries. The committee is also pushing for improved compliance from countries such as Nigeria and Iraq, which have not fully met their quota commitments, the report said.
The reduction would come on top of the current agreement between OPEC and its allies, collectively known as OPEC , which calls for cuts of 1.2 million barrels a day from late 2018 levels through March 2020.
Read: OPEC looks to reduce crude oil output by an extra 500,000 barrels a day
The deal has yet to be ratified by OPEC , and the group plans to meet in early March to review the deal and potentially extend it, according to a tweet from Herman Wang of S&P Global Platts. OPEC members will hold a closed session meeting Thursday and members will meet with allied non-member producers on Friday.
Speculation over deeper cuts had been growing over the last few days, but there was also talk that the Saudis threatened to boost their own production because other members have failed to fully comply with current output reductions.
Read: Saudi Arabia threatens to boost its oil output, even as it calls for deeper OPEC production cuts
The Saudis “put a wrench in its discussion with OPEC members by threatening to flood the market with excess production, in case OPEC members fail to show discipline,” said Raj. “With its excess capacity of 2 million [barrels a day], Saudi Arabia is uniquely positioned to unilaterally flood the market, giving it both the means as well as the motivation to manage oil prices, should OPEC members fail to agree.”
OPEC members under the current output cut reached a 145% compliance rate with the pact in November, according to an S&P Global Platts survey of the group’s production released Thursday. The Saudis have been producing well under its quota limit while countries such as Iraq and Nigeria continue to produce oil above their quotas, the survey said.
The OPEC convention comes as Saudi Arabia completes the initial public offering of a 1.5% stake in energy behemoth Saudi Aramco. The oil giant priced its IPO Thursday at 32 riyals per share, valuing the company at $1.7 trillion. Trading is expected on the Saudi Tadawul stock exchange next week.
The meeting of OPEC and its allies also comes after the Energy Information Administration on Wednesday reported that U.S. crude supplies fell by 4.9 million barrels for the week ended Nov. 29. That followed increases in each of the past five weeks. Analysts polled by S&P Global Platts forecast a fall of 700,000 barrels. The American Petroleum Institute on Tuesday reported a 3.7 million-barrel decline.
Back on Nymex, January gasoline
RBF20, 0.35%
tacked on 1.1% to $1.6211 a gallon and January heating oil
HOF20, 0.41%
rose 0.5% to $1.933 a gallon.
January natural gas
NGF20, -0.37%
rose 2.8 cents, or 1.2%, to $2.427 per million British thermal units.
The EIA reported Thursday that domestic supplies of natural gas fell by 19 billion cubic feet for the week ended Nov. 29. Analysts expected a fall of 21 billion cubic feet, on average, according to a survey conducted by S&P Global Platts.
