LONDON – Oil prices rose on Thursday on expectations OPEC and allied oil producers will deepen output cuts in an effort to prop up prices and prevent a glut next year.

Oil rises as OPEC, allies gear for deeper output cuts- oil and gas 360

Source: Reuters

A ministerial panel of key OPEC members and other major producers led by Russia recommended increasing output cuts by 500,000 barrels per day (bpd) in the first quarter of 2020, according to Russian Energy Minister Alexander Novak.

The Organization of the Petroleum Exporting Countries and other producing nations, a group known as OPEC+, currently have an output reduction level of 1.2 million bpd.

Brent crude futures were up 55 cents, or 0.87%, to $63.55 a barrel by 1522 GMT. Brent surged 3.6% on Wednesday. West Texas Intermediate (WTI) crude futures were up 27 cents to $58.70 a barrel, their highest since late September.

The OPEC ministers met on Thursday in Vienna and OPEC+ will meet on Friday to vote on the extension.

The OPEC+ group has been curbing output since 2017 to counter surging production from the United States, now the world’s biggest oil producer thanks to rapid growth in shale oil output.

Next year, rising production in other non-OPEC countries such as Brazil and Norway threatens to add to the glut.

“We expect a constructive outcome to today’s meeting in terms of a prolongation of the deal, but are not yet convinced that a strong bullish surprise with a sizeable adjustment to the target level will really transpire,” Vienna-based consultancy JBC Energy said in a note.

OPEC’s effort to deepen cuts and increase member compliance was also driven by the group’s de facto leader Saudi Arabia’s hopes to see higher oil prices to support its budget and initial public offering (IPO) of state-owned Saudi Aramco.

Aramco priced the IPO at the top of its indicative range, making it the world’s biggest stock market flotation and valuing the company at $1.7 trillion, according to sources.

Oil prices surged on Wednesday on expectations of deeper OPEC cuts and data showing a large drop in U.S. crude inventories last week. But prices are still roughly where they were a week ago as concerns about a U.S.-Chinese trade war persist.

U.S. President Donald Trump on Wednesday described trade talks with China as going “very well”, a day after saying it could take until after next year’s presidential election to complete an agreement.

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