Oil edged higher on Thursday, lifted by a reported drop in U.S. crude inventories stored at the Cushing, Oklahoma, delivery hub, and as commitments from Gulf OPEC members assuaged lingering doubts in the market about cooperation from other producers.
Energy ministers from Saudi Arabia and Gulf allies told their Russian counterpart this week they are willing to reduce their peak oil output by up to 4 percent, sources familiar with the matter said.
"That seems to be the reason behind the price move," said Carsten Fritsch, analyst at Commerzbank. "But the big question is, how will they handle Iraq."
The Organization of the Petroleum Exporting Countries (OPEC) agreed last month to restrain output to boost prices, which have been slumping at less than half their mid-2014 levels due to a persistent supply glut.
Iraq on Sunday called for an exemption, adding to the list of members seeking special treatment. The expectation was that Libya, Nigeria and Iran should be exempt as their output had been hit by wars and sanctions, OPEC sources said.
While doubts linger about OPEC's ability to implement the cut, the market has been leery of reading too much into it ahead of a meeting scheduled for the end of November, said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.
"All that should be bearish, but the market is reluctant to get significantly short in front of that because of obviously, a political decision could catch them on the wrong side," he said.
OPEC has been seeking cooperation from external producers, though non-member Russia said it would not cut output, but rather freeze it, the sources said.
OPEC members are expected to have a technical meeting on Friday and one with officials from non-member countries on Saturday.
OPEC oil ministers meet on Nov. 30, and are expected to hash how then much individual countries should cut.
The market was keeping an eye on escalating protests in Venezuela against the rule of President Nicolas Maduro, although there was no sign of any impact on the OPEC member's oil output. Venezuelan production has been falling this year as low prices hit investment.
U.S. crude stockpiles at the Cushing, Oklahoma, delivery base showed a weekly decrease of 650,000 barrels, traders said, citing data from energy monitoring service Genscape.
Oil also drew support from the unexpected drop in U.S. crude inventories, and larger than expected falls in stocks of gasoline and distillates, reported this week, which raised hopes that a long-awaited market rebalancing is finally under way.
"The global stock overhang must be reduced in order to see higher prices. Whilst such reduction is largely in the hand of OPEC, the re-balancing is already taking place in the U.S.," Tamas Varga of oil broker PVM said.