Oil prices edged up onThursday after a larger-than-expected drop in U.S. crude stocks and as traders waited to see if OPEC ministers meeting in Nigeria would hold off from making further cuts to output.
U.S. light crude for January rose 29 cents to $61.66 a barrel, to add to 35-cent gains on Wednesday.London Brent crude for January traded 23 cents up at $61.56,ahead of its expiry on Thursday.
OPEC meets on Thursday to set output policy. Minister sagree the market is oversupplied, but some say winter is thewrong time to cut, with U.S. government data on Wednesdayshowing crude stocks slid by 4.3 million barrels as importsdeclined
"Last week's hefty draw on bloated U.S. crude oil stocks came too early to ascribe it to OPEC," said Jan Stuart at UBS."As OPEC cuts take hold and refiner crude oil demand rises,prompt surpluses should turn into prompt tightness as early asnext quarter."
An OPEC delegate said on Thursday that oil ministers are discussing cutting the group's output further by 300,000barrels per day (bpd) to one million bpd, effective fromFebruary.
This would be a potentially deeper but later cut than recommended by OPEC's advisory committee, which suggested amodest 300,000 bpd cut from Jan. 1 or for members to ensure they adhered to a deal cutting supplies from November.
OPEC research director Hasan Qabazard has said if membersabide by the deal they struck in October, that should restore equilibrium. OPEC has delivered almost two thirds of the 1.2 million bpd reduction so far, according to Reuters estimates.
OPEC delegates said Algeria, Iran, Kuwait, Qatar, SaudiArabia and the United Arab Emirates favoured stricter compliance and no change to OPEC's 26.3 million bpd production target.
"I don't think there will be any cut," the head of Libya's delegation, Shokri Ghanem, told Reuters in Abuja on Wednesday.
U.S. Energy Secretary Sam Bodman and International EnergyAgency head Claude Mandil have called on OPEC to wait until next year before deciding on further supply reductions.
OPEC supply cuts already in place are tightening the worldmarket and are "cold comfort" for a risk-prone global economy,the International Energy Agency said on Wednesday.
A lower estimate of supply from producers outside OPECprompted the IEA to slightly increase an estimate of demand forthe group's crude in 2007 to 28.4 million bpd.
"OPEC seems to be edging away from cutting oil production at today's meeting and delaying any decision until January,"said Tobin Gorey of the Commonwealth Bank of Australia.