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Oil prices edge up in cautious trading ahead of Opec meeting
[SINGAPORE] Oil markets stabilised in cautious trading on Friday ahead of an OPEC decision that is likely to keep the market oversupplied and sets aside warnings of a second lurch lower in prices as some members like Iraq and Iran look to ramp up exports.
Traders said market participants were reluctant to take on new positions ahead of a final decision from Opec as a surprise outcome could have a huge impact on crude markets. Prices have tumbled 5 per cent over the previous two sessions as investors expect the global oversupply to continue. "Prices came under pressure as Iraq ... exports are now expected to rise approximately 5 per cent in June as various fields boost output," ANZ said.
With fundamentals little changed, prices on Friday edged up in early trading as some traders expected a fall in US rig activity to soon begin to translate into lower production.
Renowned oil trader Andy Hall expects US crude prices to rise above US$65 a barrel despite the high global production of oil, citing the drop in the US oil rig count as a factor. "Despite a collapse in rig counts in the US, oil production has yet to register a sustained decline. But it will come," Mr Hall said in a monthly letter to investors in his US$3.3 billion Connecticut-based hedge fund Astenbeck Capital Management.
Front-month Brent futures were trading at US$62.18 per barrel at 0319 GMT on Friday, up 15 cents, while US crude futures were up 2 cents at US$58.02.
Yet overall market fundamentals remain weak, with millions of barrels of crude loaded in tankers waiting for buyers.
By agreeing to maintain its existing output ceiling, the Organization of the Petroleum Exporting Countries (Opec) would continue to support the world's top exporter Saudi Arabia, which last year said it would not cut production to keep prices high, triggering the biggest price fall since the financial crisis of 2008.
With oil prices having rebounded by more than a third after hitting a six-year low of US$45 a barrel in January, Opec officials in Vienna see little reason to tinker with a strategy that seems to have resurrected moribund growth in oil consumption and put a damper on the US shale boom.