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US crude ticks down 14 cents, settling at $50.55, ahead of OPEC meeting on output cuts

  • OPEC is set to discuss a potential extension of production cuts at a meeting in Vienna on Friday.
  • U.S. crude production has reached pre-Harvey storm levels.
An oil pump jack in the oil town of Gonzales, Texas.
Getty Images
An oil pump jack in the oil town of Gonzales, Texas.

Oil prices were largely steady on Thursday ahead of a meeting of oil producers that could extend production limits aimed at clearing a glut that has depressed the market for more than three years.

Brent crude futures, the international benchmark for oil prices, were up 18 cents at $56.47 a barrel at 2:26 p.m. ET (1826 GMT). Brent posted its best closing price since March 1 on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures ended Thursday's session down 14 cents at $50.55 per barrel. That marked the highest closing level in nearly four months, following the expiration of October's contract on Wednesday.

Oil prices have surged more than 15 percent over the last three months as global oil supply has tightened. That gain would make this the strongest third quarter for the market since 2004.

"The bull run in the oil market is running out of steam as unease builds ahead of tomorrow's OPEC/non-OPEC meeting," said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

Ministers from the Organization of the Petroleum Exporting Countries, Russia and other producers meet in Vienna on Friday and are due to consider extending output cuts that began in January.

OPEC and its allies have agreed to reduce output by about 1.8 million barrels per day (bpd) until March 2018 in an attempt to empty inventories. But oil markets remain amply supplied due to the exemption of OPEC members Libya and Nigeria and a lack of compliance by others, triggering calls for stricter or extended cuts.

"Exempt members Libya and Nigeria may be brought into the fold of the production cut deal," said Jeffrey Halley, senior market analyst at futures brokerage OANDA.

Kuwaiti Oil Minister Essam al-Marzouq said on Thursday that compliance with OPEC-led oil output cuts was "very good" and above 100 percent.

Many analysts now expect OPEC to extend the deal, possibly to the end of next year.

OPEC's efforts have been hampered by higher production in some other parts of the world, including the United States, where shale oil production is reaching record highs.

Recent hurricanes in the Gulf of Mexico have also pushed up crude oil inventories in some parts of the United States as U.S. refineries have been shut by flooding.

U.S. commercial crude oil stocks rose for a third straight week, building by 4.6 million barrels in the week ending Sept. 15 to 472.83 million barrels.

U.S. oil production has reached 9.51 million bpd, up from 8.78 million bpd directly after Hurricane Harvey hit the U.S. Gulf Coast.

The structure of oil futures prices suggests OPEC production cuts are beginning to have an impact, analysts say.

Front-month Brent futures have risen sharply in recent months, much more than forward prices. This has changed the Brent price curve, moving it into what traders call "backwardation," when prices for immediate delivery are higher than prices for later barrels.

The shift is seen as an indicator of a tightening market as it encourages the immediate sale of oil rather than holding it in storage.

The dollar rose to a two-month high against the yen after the U.S. Federal Reserve announced it would unwind post-crisis stimulus measures and raised expectations of an interest rate increase in December.

"We're a little rangebound and choppy, not too much of a direction," said Tariq Zahir, a trader with Tyche Capital Advisors in New York. "The dollar is a little stronger."

— CNBC's Tom DiChristopher contributed to this report.

Correction: The headline has been updated to reflect that U.S. crude fell 14 cents on Thursday.