Oil prices were up slightly on Friday in volatile trading.  Prices were underpinned by expectations that at a meeting next month in Vienna, OPEC will agree to cut output in 2019.  ConocoPhillips photo.

Oil prices stabilizing after sharp fall on Tuesday

Oil prices were up slightly in volatile trading on Friday as investors remained hopeful that OPEC would agree to more production cuts when they meet in Vienna next month.

By 3 p.m., EST, benchmark Brent crude was up 30 cents to $66.92/barrel.  Brent is currently on its third day of gains after hitting an eight-month low on Tuesday and is down about 4.7 per cent on last week’s close.

US West Texas Intermediate rose 24 cents to $56.92/barrel, down from a session high of $57.96/barrel.  On Tuesday, WTI posted its steepest one-day loss in over three years and is currently on track to lose 6 per cent this week.  This is the sixth straight week of declines.

Tariq Zahir, managing member at Tyche Capital Advisors told Reuters that after Tuesday’s sharp decline, the oil market was due for a slight correction and is now stabilizing.

But gains will be limited as traders remain cautious going into the weekend, according to Bob Yawger, director of energy futures at Mizuho.  “A relief rally was in the cards,” Yawger told Reuters.

Saudi Arabia is looking to continue with its program of production cuts in 2019 and is looking for major producers to cut their combined production by 1.4 million barrels per day (b/d), or about 1.5 per cent of global supply to balance the oil market.

However, some producers currently participating in the cartel’s supply cut agreement, including Russia, are not enthusiastic about the kingdom’s plan.

OPEC producers are scheduled to meet on Dec. 6 in Vienna to finalize decisions on production policy for the first six months of 2019.  Some analysts say an agreement to cut output could produce a quick rebound in prices, especially if Venezuelan and Libyan production continues to decline.

As well, US sanctions on Iranian crude will have some impact on the global oil supply, despite the Trump administration granting temporary waivers to a number of Iran’s biggest customers.

“We are likely from December onwards to have at least 1 million barrels per day (b/d) less of (Iranian) crude exports,” Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told Reuters.

Tchilinguirian says he could see Brent recover to $80/barrel this year.

Another factor underpinning oil prices is Iraq resumed crude exports from its northern Kirkuk oilfields on Friday.  An oil ministry spokesman said the fields pumped between 50,000-100,000 b/d, down from some analysts’ expectations of 300,000 b/d.

Data from the US Energy Information Administration showed US crude production hit a record high of 11.7 million b/d last week.  The EIA says the record output contributed to the biggest weekly gain in US crude inventories in nearly two years.

Baker Hughes reported in its weekly oil rig count that US drillers added two rigs, bringing the total rig count to 888.  This is the highest level since March 2015.  In Canada, the rig count rose by one to 118.