LONDON (Reuters) – Oil prices steadied on Thursday on expectations that Saudi Arabia and Russia would extend production cuts, although record U.S. exports and the return of supply from a Libyan oilfield dragged on the market.
“OPEC and Russia are talking about extending production limits, but there’s still plenty of supply with U.S. crude exports up sharply,” said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt.
Brent crude was up 35 cents at $56.15 a barrel by 1000 GMT. U.S. light crude was up 10 cents at $50.08.
Both crude benchmarks have fallen more than 5 percent over the last week as investors have booked profits after almost three months of gains.
Russian President Vladimir Putin said this week that a pledge by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to cut oil output to boost prices could be extended to the end of 2018, instead of expiring in March 2018.
Russian Energy Minister Alexander Novak said on Thursday that Moscow would support new countries joining the agreement to restrict oil supply.
The statement came as Saudi Arabia’s King Salman visited Moscow.
“Putin and Salman will most likely reach, but not announce, an agreement to extend the OPEC/non-OPEC production deal, though with a commitment to taper the cuts,” said Eurasia Group.
The pact on cutting output by about 1.8 million barrels per day (bpd) took effect in January this year.
Despite this, other factors weighed on oil prices, including the return to production of Libya’s Sharara oilfield after an armed brigade forced a two-day shutdown.
Higher U.S. oil exports also dampened market sentiment.
U.S. crude oil exports jumped to 1.98 million bpd last week, surpassing the 1.5 million bpd record set the previous week, the Energy Information Administration said.
The increase followed a widening of the discount for U.S. crude against Brent, making U.S. oil attractive on world markets.
Beyond short-term market drivers, analysts at Barclays said future oil demand could be undermined by improving fuel-efficiency and the rise of electric vehicles (EV).
“EV uptake and increased fleet fuel-efficiency could cut oil demand by around 3.5 million bpd in 2025,” the bank said. That is almost as much as major OPEC member Iran produces.
If the uptake of EVs rose to one-third of new cars by 2040, as many industry analysts expect, up from just 1 percent now, that could “affect oil demand by around 9 million bpd”, Barclays said.