Crude inches up on report of proposed Saudi oil deal
Plants are pictured near an oil pump, owned by oil company Rosneft, in the settlement of Akhtyrskaya in Krasnodar region, southern Russia, December 21, 2014. REUTERS
Crude prices inched up on Thursday on a report suggesting that Saudi Arabia will propose a deal to balance oil markets, in the first sign the top OPEC producer is willing to compromise after a rout that has more than halved oil prices since June 2014.
US crude was trading 29 cents higher at $40.23 per barrel at 0517 GMT, while internationally traded Brent was up 48 cents at $42.97.
Saudi Arabia, which has so far resisted any intervention, will propose a cut of 1 million barrels per day (bpd) in OPEC output, Energy Intelligence reported, citing a senior OPEC delegate.
"The market will want to hear from other parties and to have greater assurance that it looked a possibility," said Ric Spooner, chief market analyst at Sydney's CMC Markets.
"Not only do (the other producers) have to agree to do it, they also have to stick by the agreement."
OPEC's top producer, Saudi Arabia, wants non-OPEC counties such as Russia, Mexico, Oman and Kazakhstan to participate in the deal.
But it will be challenging to get all parties to agree, given diverging views on which producers should cut or limit production.
"Saudi to propose 1 million bpd cuts ... if ... Iran, Iraq and OPEC join cuts. In other words won't happen. Whoever does cut will lose market share," Asenna Wealth Solutions' senior trader Assad Tannous wrote in a tweet following the news.
Saudi Arabia does not expect a formal deal to be reached this week, but would like the agreement to be implemented next year, Energy Intelligence reported.
OPEC's historic decision last year to maintain high output to defend market share from other producers such as Russia and U.S. shale drillers, sent oil prices into a spiral.
OPEC is set to meet in Vienna on Friday to discuss its policy at a time when a global glut shows no signs of abating.
US crude inventories rose for a 10th straight week, climbing 1.2 million barrels, contrasting analysts' expectations of a fall, data from the US Energy Information Administration showed on Wednesday.
Additionally, oil product supplies are also building as warmer-than-usual weather in the US northeast, a major market for heating oil, limits demand. Distillate stockpiles climbed by 3.1 million barrels last week, the EIA said, far exceeding expectations of a gain of 326,000 barrels.
Oil production already exceeds demand by 0.5-2 million barrels per day.