London: Oil prices rose on Tuesday as traders looked to a meeting next week at which major crude exporters are expected to extend production cuts, though rising US output capped gains.
Brent crude oil was up 47 cents at $62.69 a barrel at 0932 GMT. US light crude was at $56.74, up 32 cents.
Analysts said Brent was expected to fluctuate in a narrow range, between $61 and $63, as the market awaited the outcome of the Organisation of the Petroleum Exporting Countries' meeting on November 30.
Opec, together with a number of non-Opec producers led by Russia, has been restraining output this year in an effort to end a global supply overhang and prop up prices. At its meeting next week, the group is widely expected to extend the deal beyond its March 2018 expiry date.
"There's a general belief that anything but an extension could have a significant negative impact ... So the market is just waiting for confirmation that Opec wants to move on with the extension," said Ole Hansen, senior manager at Saxo Bank. Opec is expected to extend cuts as storage levels remain high despite recent drawdowns, although there are doubts about the willingness of some participants to keep restricting production.
But the biggest headache for Opec has been a rise in US drilling, led by shale oil producers.
Energy consultancy Westwood Global Energy Group said US output would climb even faster than implied by the rising rig count, which has jumped from 316 rigs in mid-2016 to 738 last week, as producers become more productive per well. "Westwood Global Energy forecasts an 18 per cent increase in active rigs in 2018, but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less," the consultancy said.
FGE, another consultancy, also warned that potential supply disruptions in 2018, during an already tighter market, could trigger oil price spikes.
But it said the market could slump again towards 2019 if US production continued to soar, especially since the Opec deal withholding output must end at some point. "We see another big rush with (US) production growth of some 1-1.5 million bpd (barrels per day) in 2018 and 2019," FGE said.
Reflecting rising US oil exports to Asia, US commodity exchange CME Group said it would list a new futures contract that prices the spread between US WTI futures and Middle East benchmark Dubai, starting December 18.