Brent crude slipped to near $63.50 a barrel before OPEC and its allies meet this week to discuss prolonging their output cuts beyond March.
Futures dropped as much as 1.2 percent in London, extending Monday’s slight decline. Uncertainty over the outcome of Thursday’s meeting is creating the risk of a slide in prices, which have gained on assumptions that the curbs will be prolonged for nine months, according to Goldman Sachs Group Inc. OPEC backs such an extension but is still waiting for commitments from Russia, according to people familiar with the matter.
Crude surged earlier this month on signs the Organization of Petroleum Exporting Countries and its partners will prolong cuts aimed at shrinking a global glut. Prices, time spreads and hedge-fund positioning all reflect a high probability the group will follow a Saudi proposal to extend the pact to the end of 2018, Goldman said. Yet Saudi Energy Minister Khalid Al-Falih said Tuesday that it’s too early to talk about the duration.
“Optimism has driven prices up quite a bit and now we’re seeing some cautiousness being priced in ahead of OPEC,” said Hans Van Cleef, senior energy economist at ABN Amro. “Although it’s pretty certain that the agreement will be extended, it’s more about the details and we know that Russia would prefer to wait a bit longer.”
Brent for January settlement declined 43 cents to $63.41 a barrel on the London-based ICE Futures Europe exchange at 8:51 a.m. New York time, after closing down 2 cents on Monday. The global benchmark crude traded at a premium of $5.68 to West Texas Intermediate.
WTI for January delivery was at $57.75 a barrel on the New York Mercantile Exchange, down 36 cents. Total volume traded was about 5 percent above the 100-day average. Prices fell 84 cents to $58.11 on Monday.
The path toward market stability “has seen several bumps along the way, and we have suffered occasional setbacks, but our determination and hard work are paying off,” OPEC Secretary-General Mohammad Barkindo said Monday. The oil market is steadily returning to balance, he said.