Oil prices slipped on Thursday, giving up some recent gains before a meeting of oil producers that could extend production limits aimed at clearing a glut in supplies that has depressed the market for more than three years.
Ministers from the Organization of the Petroleum Exporting Countries, Russia and other producers meet in Vienna on Friday and are due to consider extending output cuts that began in January.
OPEC and its allies have agreed to reduce output by about 1.8 million barrels per day (bpd) until March 2018 in an attempt to empty inventories. Many analysts now expect them to extend the deal, possibly to the end of next year.
“The bull run in the oil market is running out of steam as unease builds ahead of tomorrow’s OPEC/non-OPEC meeting,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.
“The (oil futures) contracts have performed well in recent sessions but are struggling for traction,” Brennock added.
Brent crude oil was down 35 cents at $55.94 a barrel by 1355 GMT. U.S. light crude was 40 cents lower at $50.29.
Both contracts have risen more than 15 percent over the last three months as global oil supply has tightened.
OPEC’s efforts have been hampered by higher production in some other parts of the world, including the United States, where shale production is reaching record highs.
Hurricanes in the Gulf of Mexico have also pushed up crude inventories in some parts of the United States as refineries have been shut by flooding.
U.S. commercial crude stocks rose for a third week, building by 4.6 million barrels in the week ending Sept. 15 to 472.83 million barrels.
U.S. production has reached 9.51 million bpd, up from 8.78 million bpd after Hurricane Harvey hit the U.S. Gulf.
U.S. crude received some support from a strong draw in gasoline stocks by 2.1 million barrels to 216.19 million barrels, traders said.
The structure of oil futures prices suggests OPEC production cuts are beginning to have an impact, analysts say.
Front-month Brent futures have risen sharply in recent months, much more than forward prices. This has changed the Brent price curve, moving it into what traders call “backwardation”, when prices for immediate delivery are higher than prices for later barrels.
The shift is seen as an indicator of a tightening market as it encourages the immediate sale of oil rather than holding it in storage.