World oil prices rose this week on concerns that heightened geopolitical tensions could disrupt Middle East supplies despite a market awash with crude.
Traders were turning their attention to next week’s OPEC output meeting to see if the oil producers’ cartel will slash high output levels.
The 12-nation OPEC, which counts the world’s biggest oil producer Saudi Arabia among its members as well as Nigeria, Venezuela and Iran, holds a regular meeting in Vienna on 4 December.
Most analysts expect the cartel to stick to its decision taken at the last meeting in June, when OPEC defied calls to cut output despite sliding oil prices, so extending its strategy of preserving market share and fending off competition from the US shale energy boom.
Keeping the status quo would see the Organization of Petroleum Exporting Countries’ official production target left at 30 million barrels per day — where it has stood for four years — following pressure from cartel kingpin Saudi Arabia on the other members.
“We continue to believe that there will not be any change in Saudi or OPEC policy” in Vienna, noted Societe Generale analyst Michael Wittner.
“Oil market oversupply will continue through next year, due to resilient US production — even if it is declining — high OPEC output led by Saudi Arabia and Iraq and the gradual return of Iran starting in” 2016, he added.
OPEC member Iran last week said it would not negotiate with the cartel over a planned half million barrels per day oil production hike once sanctions are lifted.
Despite a supply glut that has caused crude prices to more than halve over the past 18 months — due primarily to high output from US shale rock but also owing to weaker Chinese demand — Iran has consistently said it plans to up its output when nuclear-related sanctions are lifted under a deal agreed in July with world powers.
Downward pressure on the oil market this week was meanwhile capped by the shooting down by Turkey of a Russian fighter jet on the Syrian border.
But reports that Russia is not taking military action against Turkey in retaliation eased fears that the tense situation in the region could escalate and disrupt Middle East oil supplies.
Moscow said retaliatory measures would focus on using its leverage to tighten the screws on Turkey’s economy, including halting joint economic projects.
Next week will see traders monitoring also the meeting of the Federal Reserve, when policymakers are expected to lift US interest rates for the first time in almost a decade.
A hike would likely boost the dollar, making oil priced in the US unit more expensive for holders of weaker currencies.
By late Friday in London, Brent North Sea crude for delivery in January edged higher to $44.93 a barrel from $44.66 a barrel one week earlier.
US benchmark West Texas Intermediate for January stood at $42.02 a barrel compared with $40.39 for the expired December contract one week earlier.