Oil prices rose on Wednesday, supported by reports of a drop in US commercial crude inventories and the loss of storage capacity in Libya, but under pressure ahead of a meeting of OPEC exporters which may increase global production.
Brent crude was up 50 cents at $75.58 a barrel by 1335 GMT. US light crude was $1.05 higher at $66.12.
US crude inventories fell by 3 million barrels to 430.6 million barrels in the week to June 15, according to an American Petroleum Institute report on Tuesday.
Traders said a drop in Libyan supplies due to the collapse of an estimated 400,000-barrel storage tank also helped push up prices.
Looming large over markets, however, were meetings scheduled on June 22-23 in Vienna of the Organization of the Petroleum Exporting Countries with other big producers, including Russia.
Saudi Arabia is trying to convince fellow OPEC members of the need to raise oil output, sources familiar with the talks said on Wednesday.
Russia, not in OPEC but the world’s biggest oil producer, is also pushing to loosen supply controls introduced to prop up prices in 2017.
Other OPEC members, including Iran, oppose such a move, fearing a price slump.
Iran signaled on Wednesday it might allow a small increase in OPEC oil output, letting some OPEC members that had overdelivered on cuts to return to compliance with quotas.
That would effectively mean a modest boost from producers such as Saudi Arabia that have been cutting more deeply than planned despite production outages in Venezuela and Libya.
“The run-up to this OPEC meeting is fraught with uncertainty with Iran from the onset adopting a very entrenched opposition to any supply increase,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told Reuters Global Oil Forum.
Jack Allardyce, research analyst at Cantor Fitzgerald Europe, expects OPEC to compromise and agree a fairly modest increase of 300,000-600,000 barrels per day in production, equivalent to about 0.5 percent of world production.
“We could see this knocking $5 per barrel off Brent,” Allardyce said.
US-China trade tension
Markets are also watching tension between the United States and China, with both sides threatening to impose duties on each other’s exports, including US crude oil.
A 25 percent tariff on US crude oil imports, as threatened by China in retaliation for duties Washington has announced but not yet implemented against Chinese products, would make US crude uncompetitive in China versus other supplies.
This would almost certainly lead to a sharp drop-off in Chinese purchases of US crude, which have boomed in the last two years to a business now worth around $1 billion per month.
More data on the state of the US oil market will be published at 10:30 a.m. EDT (1430 GMT) when the US Energy Information Administration releases its weekly data.