Oil prices were higher on Tuesday as expectations of an extended period of OPEC-led output cuts overshadowed forecasts of rising US shale oil production.
In early European trade on Tuesday, benchmark Brent crude was up 0.55% to $62.55 a barrel, while Nymex West Texas Intermediate was 0.37% higher at $56.63 a barrel.
OPEC output curbs
The Organisation of the Petroleum Exporting Countries and a group of non-OPEC members that include Russia have curbed output since the start of the year in an effort to help rebalance supply and demand in the oil market.
Members of this alliance are now looking to unite again in extending production curbs beyond the March 2018 expiry of the deal.
OPEC members meet on 30 November and are expected to agree an extension to the curbs - although doubts remain about the commitment of some countries to continue the action.
“If the cuts continue, the stocks surplus will reduce to just some 50 million barrels above the 5-year average in the third quarter of 2018 (down from 140 million barrels above that average now) and prices will hit $65-70 per barrel,” said FGE, the energy consultancy.
Rising US shale oil output
But the impact of the OPEC-led output curbs has been tempered by rising production from US shale oil operators. Rising rig counts in the US demonstrate that shale operators are now finding cheaper methods of production that make shale output profitable at lower oil prices.
However, the latest data from the US Department of Energy showed that crude strategic petroleum reserves in the US fell to 667.4Mmbbls for the week ending 17 November, down from 669.2Mmbbls in the previous week, and the lowest level seen in 13 years.
Investors now await the weekly inventory reports - most importantly from the influential US Energy Information Administration on Thursday.