Brent crude oil prices steadied above $50 a barrel on Monday, supported by a planned production cut by exporter club OPEC, but still under pressure from an overhang in supply that currently exceeds consumption.
International benchmark Brent crude futures LCOc1 were trading at $50.25 per barrel at 0651 GMT, up 6 cents from their last close, although U.S. West Texas Intermediate (WTI) futures CLc1 were down 8 cents at $48.16 a barrel.
Oil prices had been supported “following OPEC’s preliminary agreement to cut production,” ANZ bank said on Monday.
The Organization of the Petroleum Exporting Countries (OPEC) said last week that it would cut output to between 32.5 million barrels per day (bpd) and 33.0 million bpd from about 33.5 million bpd, with details to be finalised at its policy meeting in November.
For now, traders said markets were still being weighed down by an ongoing supply overhang as rival OPEC-members like Saudi Arabia, Iran and Iraq are reluctant to give away market share.
OPEC’s oil output is likely to reach 33.60 million bpd in September from a revised 33.53 million bpd in August, its highest in recent history, a Reuters survey found on Friday.
“Sentiment has been slightly dented by a Reuters survey Friday, showing that despite agreeing to cut production OPEC pumped crude in record amounts through September,” said Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore.
Analysts said there was downside risk to oil prices if the planned cut wasn’t deep enough to bring production back in line with consumption.
“OPEC has created its own Q4 risk to oil prices … In raising expectations of a November deal to cut production, it also risks a steep price decline should it fail to achieve its goal of cutting output back to less than 33 million bpd,” Barclays said in a note to clients.
Despite that, the British bank said it did not expect a repeat of the price crash seen late last year after a rally earlier in 2015, citing an improving Asian economic growth outlook, falling oil supplies and rising investor interest in oil markets as support factors.
Trading activity was limited on Monday due to public holidays in China, Germany, Australia and parts of the Middle East.