Oil prices were higher on Tuesday as traders looked ahead to a meeting next week at which major crude exporters are expected to extend production cuts.
Brent crude oil was 0.7 percent higher at $62.67 a barrel. U.S. light crude jumped 1.2 percent to trade at $57.09.
Analysts said Brent was expected to fluctuate in a narrow range, between $61 and $63, as the market awaited the outcome of the Organization of the Petroleum Exporting Countries’ meeting on Nov. 30.
OPEC, together with a number of non-OPEC producers led by Russia, has been restraining output this year in an effort to end a global supply overhang and prop up prices.
At its meeting next week, the group is widely expected to extend the deal beyond its March 2018 expiry date.
“There’s a general belief that anything but an extension could have a significant negative impact… So the market is just waiting for confirmation that OPEC wants to move on with the extension,” said Ole Hansen, senior manager at Saxo Bank.
But doubts about the willingness of some participants including Russia to keep restricting production has led traders to take a more cautious approach and weighed on prices.
“We cannot avoid focusing on the very extended long position that’s currently in the market. It needs to be fed continued bullish news,” Hansen said.
“As we’ve had a bit of a lull in that over the past week and a half, we have seen prices drift … lower.”
However, the biggest headache for OPEC has been a rise in U.S. drilling activity, led by shale oil producers.
Energy consultancy Westwood Global Energy Group said U.S. output would climb even faster than implied by the rising rig count, which has jumped from 316 rigs in mid-2016 to 738 last week, as producers become more productive per well.
“Westwood Global Energy forecasts an 18 percent increase in active rigs in 2018, but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less,” the consultancy said.
FGE, another consultancy, also warned that though supply disruptions could lead to spikes in the oil price next year, the market could slump again towards 2019 if U.S. production continued to soar.
“We see another big rush with (U.S.) production growth of some 1-1.5 million bpd (barrels per day) in 2018 and 2019,” FGE said.
Reflecting rising U.S. oil exports to Asia, U.S. commodity exchange CME Group said it would list a new futures contract that prices the spread between U.S. WTI futures and Middle East benchmark Dubai, starting Dec. 18.