Oil prices inch higher in lacklustre pre-Christmas activity amid support for supply cuts, lower inventory forecast

Tokyo: Oil prices edged higher on Tuesday in thin pre-Christmas trading after Russia’s energy minister said cooperation with OPEC to support the market would continue and as analysts forecast a second weekly decline in US crude inventories.

Brent crude was up 5 cents at $66.44 a barrel by 0321 GMT. US West Texas Intermediate was 1 cent higher at $60.53 a barrel.

OPEC, Russia and other producers that have linked up to curtail production and support prices will continue their cooperation as long as it is “effective and brings results,” Russian energy minister Alexander Novak said in an interview on Monday.

Cooperation with the Organization of the Petroleum Exporting Countries (OPEC) would continue “until the market requires it,” Novak added.

The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen at its headquarters in Vienna, Austria. Reuters

OPEC and other producers agreed in November to extend and deepen output curbs in place since 2017. The reduction of output could see as much as 2.1 million barrels per day (bpd) taken off the market, or about 2 percent of global demand.

Still, OPEC needs to do more to balance out the market on a sustainable basis, Bjornar Tonhaugen, head of oil market research at Rystad Energy said in a note.

“The OPEC cuts didn’t fully solve the problem – instead they offer a light bandage to get through the first quarter of 2020,” said Tonhaugen, adding “after that, we believe the market will begin to realize the looming over-supply.”

US producers have been happy to fill any gaps in the market, pumping ever greater amounts of crude to reach a record high of around 13 million bpd in November.

That has helped swell inventories, which have been stubbornly resistant to drawdowns. US stocks are up around 1 percent this year.

Crude stocks are, however, expected to have fallen by about 1.8 million barrels last week, the second week of declines, according to a preliminary Reuters poll.

Still, gasoline stocks are expected to have risen for a seventh week in a row and distillate inventories are forecast to have gained for a fifth consecutive week.