Oil prices fell more than 1% on Thursday ahead of an OPEC meeting in which Saudi Arabia is expected to push the group and its allies including Russia to agree to further output cuts to support the market.
Prices were also supported by a lower-than-expected rise in crude oil inventories in the United States, alleviating some concerns of oversupply in the world’s biggest oil consumer.
U.S. West Texas Intermediate (WTI) was down by 61 cents, or 1.2%, at $46.55 per barrel.
Brent crude fell by 93 cents, or 1.7%, to $50.68 per barrel.
“Crude oil prices were boosted by a broad positive sentiment overnight, and a much lower-than-expected … crude oil inventory data,” said Margaret Yang, a market analyst at CMC Markets.
“(The) market is also anticipating a decent output cut to be carried out by OPEC+, as Covid-19 has brought a significant impact to world’s energy demand. More production curb is needed to shore up crude prices.”
U.S. crude stocks rose modestly last week, less than what analysts had expected, while U.S. oil exports surged to more than 4 million barrels per day (bpd) for the first time since December, suggesting a rise in overseas demand.
Ministers of the Organization of the Petroleum Exporting Countries (OPEC) hold their formal meeting later on Thursday, followed by a meeting of the broader OPEC+ group including Russia on Friday.
Saudi Arabia and other OPEC members are seeking to win support from Russia to join them in additional oil output cuts to prop up prices that have tumbled by a fifth this year because of the global spread of the coronavirus outbreak.
Russia has instead proposed keeping the existing cuts by the group until the end of the second quarter, sources said.
Saudi Arabia wants extra cuts of 1 million to 1.5 million bpd for the second quarter, and to keep existing cuts of 2.1 million bpd in place until the end of 2020.
“If OPEC+ settles with something in the middle of the Russian request of no change in cuts and the 1.5 million Saudi goal, that might not be enough to keep prices supported here,” said Edward Moya, senior market analyst at broker OANDA.
“OPEC+ needs to send a strong message and anything below 1 million barrels in deeper production cuts will send oil prices sharply lower.”
Geopolitical tensions in the Middle East also boosted prices. The Saudi-led coalition fighting in Yemen said it had foiled an attack on an oil tanker off Yemen’s coast on the Arabian Sea, the Saudi state news agency SPA reported on Wednesday.
Concerns over demand growth remained, however, with the International Monetary Fund chief saying the global spread of the virus has crushed hopes for stronger economic gains this year.