Oil prices held near two-month highs on Friday and were set for a third consecutive week of gains, boosted by expectations of an extension to OPEC+ production cuts although doubts over U.S. and China trade talks capped gains.
Brent crude futures LCOc1 dropped 6 cents to 63.91 dollars a barrel by 0908 GMT, while West Texas Intermediate (WTI) crude futures CLc1 fell 21 cents to 58.37 dollars per barrel.
Prices touched their highest since late September on Thursday after Reuters reported that the Organisation of the Petroleum Exporting Countries (OPEC) and Russia are likely to extend existing production cuts by another three months to mid-2020 when they meet on Dec. 5 and 6.
The group will also emphasize the need for stricter compliance with the cuts from members like Iraq and Nigeria.
“A disciplined approach from Iraq and Nigeria should shave off another 300-400,000 barrels per day (bpd) from the group’s production level leading to a balanced market in the first half of 2020 and to a possible supply deficit in the second half of 2020,” oil brokerage PVM said.
The current agreement is for a production cut of 1.2 million bpd until the end of March.
Uncertainty over whether the United States and China will be able to reach a partial trade deal that would lift some pressure on the global economy kept a lid on prices.
China has invited top U.S. trade negotiators for a new round of face-to-face talks in Beijing as efforts continue to strike at least a limited deal, the Wall Street Journal reported on Thursday citing unidentified sources.
“The key factor for the demand outlook for oil is the trade negotiation currently going on,” said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking in Sydney.
“With oil near the top of recent trading ranges it’s no surprise to see a bit of selling pressure during the session today.”
China’s commerce ministry on Thursday said that it will strive to reach an initial agreement with the United States to end the long-running trade war but the completion of a so called phase one deal could slide into next year.
News that last week saw the biggest draw down in three months for U.S. crude stock stockpiles at Cushing, Oklahoma also underpinned prices earlier this week. Cushing is the delivery point for WTI futures.