Oil prices fell sharply Friday, with benchmark Brent crude dropping more than $2 a barrel ahead of an OPEC meeting in Vienna next week as two of the world’s biggest producers, Saudi Arabia and Russia, indicated they were prepared to increase output.
Brent crude oil fell $2.15 a barrel to $73.79 by 10:56 a.m. EDT [1556 GMT]. US light crude was $1.77 lower at $65.12 a barrel. Brent crude is on track to end the week down more than 3 percent, while US crude is heading to fall 0.7 percent.
Both contracts hit 3-1/2-year highs in May, but have since drifted lower as US crude production has risen and as the Organization of the Petroleum Exporting Countries, Russia and other allies look poised to increase output in their meeting in the Austrian capital on June 22-23.
“We’re going into an OPEC meeting where everyone is talking about raising production - the only question is by how much,” said Bob Yawger, director, energy at Mizuho in New York.
Saudi Crown Prince Mohammed bin Salman told Russian President Vladimir Putin on Thursday that Saudi Arabia wants to continue cooperation with Russia on global oil markets.
Russian Energy Minister Alexander Novak said on Thursday after talks with Saudi Energy Minister Khalid al-Falih in Moscow that both nations “in principle” supported a gradual increase in production after restricting output for 18 months.
Option of gradually raising output
“We in general support this ... but specifics we will discuss with the ministers in a week,” Novak said, adding that one option would involve gradually raising output by 1.5 million barrels per day (bpd), possibly starting from July 1.
Falih offered no specific guidance on what any deal in Vienna could look like, but said: “We will see where we go, but I think we’ll come to an agreement that satisfies, most importantly, the market.”
Many analysts expect a rise in output to be agreed.
“The switch has been turned on for a supply increase,” said Olivier Jakob at Swiss oil markets consultancy Petromatrix.
Greg McKenna, chief market strategist at futures brokerage AxiTrader, said the shape of next week’s OPEC deal was far from certain and noted that Russia seemed to want a bigger rise in production than some other producers: “My guess is the increase will be something less than the 1 million bpd (barrels per day) that the U.S. is supposed to have asked the Saudis for,” McKenna said.
Oil prices found some support after attacks by armed brigades shut major Libyan oil ports on Thursday, slashing production by 240,000 bpd.