Crude prices fell slightly after a Saudi oil minister suggested that output cuts won't be extended by more than nine months in a meeting of oil major producers Thursday.
Oil prices dropped sharply after Saudi energy minister Khalid al-Falih's comments, with Brent, the global price benchmark, shedding $1 a barrel in minutes. Those losses were mostly regained after the meeting began in earnest.
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Brent crude, the global benchmark, fell 0.6% to $53.64 a barrel in morning trade. West Texas Intermediate for June delivery, meanwhile, edged down around 0.5% to trade at $51.13 a barrel.
Thursday's meeting of the Organization of the Petroleum Exporting Countries in Vienna is still widely expected by analysts and investors to result in an extension of ongoing production cuts, but comments by oil ministers derailed hopes that these reductions could be deeper than previously suggested.
Before the closed-door meeting started, Mr. Falih told reporters that it seemed "highly likely" that the 13-nation cartel, which controls about 40% of world production, would agree to roll over the same terms for a nine-month period.
OM Financial's Stuart Ive said that if the result is just a deal extension, oil is likely to trade from $50 to $60 a barrel near-term.
Consultancy Wood Mackenzie added a nine-month extension would make no change to its 2017 price forecast of $55.
Following his Saudi counterpart, the Iranian oil minister said that crude priced between $55 and $60 a barrel is right for both OPEC and Iran.
Major oil producers, namely Saudi Arabia, have been under pressure from a reduction of oil revenues since prices plummeted in 2014. Crude has traded between $48 and $57 since December of last year, kept in range by concerns about mounting stockpiles but also greater optimism regarding global demand.
While oil producers are eager to push prices up by freezing output, staunch competition from U.S. shale producers, which are leaner and faster operations, tends to push prices back down whenever they go above a certain level. Stockpiles have mounted above historical averages.
U.S. crude inventory data released Wednesday by the Energy Information Administration was broadly upbeat for producers, showing the lowest overhang since December 2014.
"All of the sudden, reducing OECD stocks to the 5-year average by March next year does not seem mission impossible," said Tamas Varga, analyst at London-based PVM brokerage.
Nymex July gasoline futures were flat at $1.67 a gallon, diesel climbed 0.1% to $1.61 and ICE gas oil lost 2% to $478.25 per metric ton.
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(END) Dow Jones Newswires
May 25, 2017 06:08 ET (10:08 GMT)