Oil prices settled a bit higher on Tuesday as expectations of an extension to OPEC-led supply cuts overshadowed a White House proposal to sell half of U.S. petroleum reserves.
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Brent crude settled up 28 cents at $54.15 per barrel. U.S. light crude was up 34 cents at $51.47. On Thursday the Organization of the Petroleum Exporting Countries (OPEC) meets in Vienna to consider whether to prolong cuts to reduce a global glut of crude. OPEC and other producing countries including Russia have cut output about 1.8 million barrels per day in the first half of 2017.
OPEC's de facto leader, Saudi Arabia, favors extending the output curbs by nine months rather than the initially planned six months, hoping to drain the crude glut and keep oil prices at or above $50 per barrel.
On Tuesday delegates from Kuwait, Algeria, Ecuador and Mexico stated support for extended output cuts. Kuwait's oil minister, Essam al-Marzouq, said, "We agree on the need to do whatever is necessary to restore balance to the oil market."
"It continues to be a momentum driven trade ahead of OPEC’s meeting," said Tony Headrick, energy market analyst at CHS Hedging. "We continue to build in what the market expects is an extension of cuts."
Early in the session oil prices fell following news of a White House plan to sell half the 688 million-barrel U.S. oil stockpile from 2018 to 2027. The sale aims to raise $16.5 billion and help balance the federal budget.
However, budget proposal delivered to Congress on Tuesday may not be passed in its current form.
The White House proposal would roll out over a 10-year period so the sales would average less than 100,000 bpd, said James Williams, president of energy consultant WTRG Economics in London, Arkansas.
Aside from the first day of the roll out, and the ensuing one-time spike in supply, "the impact on prices would be negligible," he said. "This is a little over one tenth of one percent of global daily consumption - that does not move markets."
However, if the drawdown does affect prices, "it’s going to be U.S. prices that will be impacted," said Sandy Fielden, Director of Research, Energy and Commodities. Morningstar Inc. "Generally it will push U.S. prices down so maybe WTI will trade lower than Brent. In order to clear that crude, find a home for it, it has to be discounted."
(By Julia Simon; Additional reporting by Stephen Eisenhammer in London, Henning Gloystein and Florence Tan in Singapore; Editing by Marguerita Choy and David Gregorio)