Oil near $57 as Russia wants to wait and see on production cuts

An oil pumpjack
An oil pumpjack

Oil traded near $57 a barrel following six weeks of losses as Russia held off committing to further output curbs, opening up a gap with Saudi Arabia which has called for supply cuts.

Futures in New York increased 0.3%, paring earlier gains of as much as 1.5%. Prices are recovering after concerns over global oversupply spurred OPEC and its allies to consider reducing output. Russia’s Energy Minister Alexander Novak said on Monday producers need to “ better understand both the current conditions and the winter outlook” before agreeing to a supply cut. The number of working oil rigs in the US rose to the highest in more than three years last week, according to Baker Hughes data.

Oil has slipped into a bear market after reaching a four-year high last month. While Saudi Arabia has said producers may have to cut output by 1 million barrels a day, Novak wants them to “make a balanced decision, and so far there are no criteria for it.” Trade tensions between the US and China escalated over the weekend, adding to worries supply may overtake consumption.

“It appears that the market takes a production cut for granted,” PVM Oil Associates analyst Tamas Varga wrote in a report. “We’ll see if it is right after the next OPEC meeting on December 6. It is not unreasonable to anticipate stable prices until then.”

West Texas Intermediate for December delivery, which expires on Monday, added 18 cents to $56.64 a barrel on the New York Mercantile Exchange at 11:23 in London. Total volume traded was 3% below the 100-day average. The more-active January contract gained 16 cents to $56.84.

READ: Oil short-selling jumps in record streak as faith in OPEC wanes

Brent for January settlement rose 13 cents to $66.89 a barrel on the London-based ICE Futures Europe exchange, and traded at a $10.02 premium to WTI for the same month.

OPEC ministers are scheduled to meet in Vienna on December 6, with their allies from outside the group joining them the next day. The Saudis need an oil price of $73.30 a barrel next year to balance the fiscal budget, according to the International Monetary Fund. Russian President Vladimir Putin said last week that a price around $70 “suits us completely.”

Meanwhile, drillers in the US added two more working rigs last week, bringing the total to 888, the highest level since March 2015, according to Baker Hughes data. US crude production has been rising, hitting a record in the week ended November. 9, according to government data.

Other oil-market news: A group of oil companies including Chevron and Royal Dutch Shell Plc pledged more than $100 million to support  private investment in the Permian Basin in Texas and New Mexico as the region struggles with the effects of a boom in production. Money managers have cut their net bullish Brent and WTI oil bets to the lowest in 17 months, weekly ICE Futures Europe and CFTC futures and options data on four contracts show. The Cboe/Nymex  Oil Volatility Index fell more than 3% on Friday, declining for a third day.

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