Oil Above $98, OPEC Supply Comments Offset Concern

Posted by Michelle Howard September 16, 2014

Brent crude oil rose above $98 per barrel on Tuesday, as the prospect of a likely supply cut from OPEC outweighed the impact of weak demand from the world's biggest energy consumers.

OPEC Secretary General Abdallah El-Badri told reporters he expected the group to lower its oil output target to 29.5 million barrels per day (bpd) from 30 million bpd when it meets next in late November.

Oil had fallen to a 26-month low the previous session and has tumbled from above $115 in June due to increasing supply and data indicating that demand growth would be sluggish.

The steep drop has prompted speculation that OPEC may cut output in support of prices, and Badri's comments marked the first official confirmation that such a move could occur. It would be the first cut by the cartel since 2008.

November Brent was up 44 cents at $98.32 a barrel by 1318 GMT. The October contract, which expired on Monday, had dipped to a 26-month low at $96.21 in its final session.

Brent is still down nearly 13 percent in the third quarter, its biggest such drop since the second quarter of 2012.

U.S. crude for October delivery rose 44 cents to $93.36 a barrel.

"At the moment, it's a bit of OPEC poker. It definitely gives support to the oil price and sentiment," said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

Badri's comments helped to offset the impact of growing supply from Libya, where output has increased to nearly 1 million bpd, and weaker-than-expected economic data from Germany, China and the United States.

Stocks Watch
The U.S. crude price may gain some support from an expected fall in U.S. commercial crude oil and gasoline stockpiles last week.

Crude stocks were predicted to have fallen by 1.8 million barrels on average, according to a Reuters survey of six analysts conducted ahead of weekly inventory reports from industry group American Petroleum Institute and the U.S. government's Energy Information Administration.

Thursday's referendum on Scottish independence will also be closely watched. British oil production is mostly offshore Scotland, including the crudes that constitute the Brent benchmark.