Oil holds near US$49 before Opec meeting as Saudis consider deal

[TOKYO] Oil held near US$49 a barrel as Opec ministers prepare to convene in Vienna amid speculation Saudi Arabia is considering a deal to mend divisions within the group.

Futures were little changed in New York after falling 1.1 per cent the previous four sessions. Saudi Arabia is discussing ideas including restoring a production target scrapped in December, though no formal proposal has been made, according to delegates familiar with the situation.

US stockpiles rose by 2.35 million barrels last week, the American Petroleum Institute was said to report. Government data due Thursday is forecast to show a decline.

Oil has surged about 85 per cent from a 12-year low it touched earlier this year amid signs output from the US to China declined under pressure from Opec's strategy of sustaining production amid a global glut.

Any new agreement by the Organization of Petroleum Exporting Countries will depend on Iran, which has so far rejected any cap on its supplies.

"There is a general expectation that there will be no change to the strategy,'' Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone.

"There seems to be no logical reason for the main players, such as Saudi, to change the course of action, particularly now that their strategy seems to be working."

West Texas Intermediate for July delivery was at US$48.95 a barrel on the New York Mercantile Exchange, down 6 US cents, at 12:49 pm Hong Kong time after falling as much as 0.6 per cent earlier.

The contract dropped 9 US cents to close at US$49.01 on Wednesday. Total volume traded was about 57 per cent below the 100-day average.

Output Freeze

Brent for August settlement was at US$49.82 a barrel on the London-based ICE Futures Europe exchange, up 10 US cents. The global benchmark crude traded at a 37-cent premium to WTI for August.

While Opec regularly ignores its own output targets and there was no suggestion anyone would cut production, even token gestures could show a renewed unity and lift prices.

United Arab Emirates oil minister Suhail Mohammed Al Mazrouei said Opec and producers outside the group would have to agree to any supply freeze, while Iran oil minister Bijan Namdar Zanganeh said an output ceiling has "no benefit" for the Persian Gulf state.

BLOOMBERG