NEW YORK (DTN) -- New York Mercantile Exchange oil futures opened mixed with an upside bias Tuesday morning as hopes for a production cut by the Organization of Petroleum Exporting Countries weighed against skeptics who see no chance of the cartel unanimously agreeing to such a move.
The market has been under pressure on concerns about global oil oversupply but the latest upside was driven by comments from Iraq's oil minister Adel Abdul Mahdi to the effect that OPEC was ready to reduce output if non-OPEC producers were willing to do the same.
Mahdi said Saudi Arabia and Russia have become more flexible on considering output reductions. The comment was interpreted by some traders to mean OPEC could reach an agreement with non-OPEC producers to stabilize the market. The market is expected to continue seesawing for the rest of Tuesday’s session.
At 8 a.m. CT, NYMEX March WTI crude oil futures gained 33 cents to $30.67 barrel while ICE March Brent oil futures increased 38 cents to $30.88 bbl after oscillating during pre-market trade in the United States.
In products trade, NYMEX February ULSD futures gained 1.31 cents to $0.9484 gallon while the February RBOB futures contract eased 0.30 cents to $1.0270 gallon.
On Wall Street, major equity indices were heading for a higher open, tracking oil futures’ upside. Stock market traders are keeping an eye on the Federal Open Market Committee meeting that starts its two-day meeting Tuesday, but few analysts expect the central bank to raise interest rates in view of recent weak economic data.
Oversupply remains the biggest issue for oil traders. Saudi Arabia is the world's top producer and a force within OPEC while Russia is a to non-OPEC producer. Both are producing at record levels and analysts are skeptical a deal could be reached to cut output given recent comments by Saudi Arabia and Russia.
The Saudis have hinted they won't cut production in order to make room for additional barrels from Iran, with the kingdom saying on Monday that it will maintain its capital expenditures on oil and gas projects because it could survive ongoing low oil prices.
Analysts said the market remains volatile and the latest uptick in oil prices was transient because sentiment remains bearish, with traders betting oil prices will head toward $25 bbl due to a glut of supply and fears a global economic slowdown would undermine demand.
Iraq also announced on Monday that it produced a record 4.13 million barrels per day in December, representing a month-on-month increase of 383,000 bpd. Iran has said it would raise its output by 500,000 bpd as soon as February after the lifting of sanctions a week-and-a-half ago.
A senior Russian official also reportedly said Tuesday that Russia will maintain its current crude oil output level for now but may ease production if lower price trends persist. Domestically, oil production in the United States has been resilient despite a continuing decline in active oil rigs.
Traders are also keeping an eye on oil and economic data due out this week. An early survey of analysts shows U.S. crude oil stocks will show a 2 million bbl build, a 1 million bbl increase in gasoline inventories and a 2 million bbl drawdown in total distillate storage levels.
George Orwel can be reached at email@example.com
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