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Oil holds above US$50 as Russia sends mixed messages on output cut

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Oil held above US$50 a barrel amid uncertainty over Russia's willingness to join Opec efforts to stabilise the market.

[HONG KONG] Oil held above US$50 a barrel amid uncertainty over Russia's willingness to join Opec efforts to stabilise the market.

Futures were little changed in New York after declining 1.1 per cent Tuesday. Russia's largest producer Rosneft PJSC questioned the need for it to reduce output, according to Reuters, after President Vladimir Putin had earlier said his nation would join the Organization of Petroleum Exporting Countries in limiting production. The comment from Rosneft chief executive officer Igor Sechin doesn't contradict Mr Putin's stance on a supply deal, the Kremlin said.

Oil rose to a 15-month high Monday after Saudi Arabia expressed optimism that a deal could be finalised to cut output and Russia signaled support. While Saudi Arabia's oil minister left Istanbul before a producer meeting Wednesday, Opec Secretary-General Mohammed Barkindo said most of the work on an accord was already done and countries including Russia, Azerbaijan, Algeria and Venezuela will still meet to "compare notes".

Opec supply quotas will be decided at the group's official gathering late next month in Vienna.

"The lead up to the November Opec meeting could see some volatility amid doubts about a supply deal," said Angus Nicholson, a market analyst in Melbourne at IG Ltd. "I don't think a drop below US$45 is likely given the potential upside shock of a supply agreement coming together."

West Texas Intermediate for November delivery was at US$51.12 a barrel on the New York Mercantile Exchange, up 33 US cents, at 8:18am in London. The contract declined 56 US cents to US$50.79 on Tuesday, falling from the highest close since July 2015. Total volume traded was about 52 per cent less than the 100-day average. Prices rose 7.9 per cent last month.

Brent for December settlement rose 40 US cents to US$52.81 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 73 US cents to US$52.41 on Tuesday. The global benchmark was at a US$1.25 premium to December WTI.

An output freeze or cut is probably the only proper move to preserve stability in the global energy market, Mr Putin said Monday at the World Energy Congress in Istanbul. Russia is ready to coordinate oil production limits with Opec when the group makes a final supply agreement, Kremlin spokesman Dmitry Peskov told reporters on a conference call.

Saudi Arabian Oil Minister Khalid Al-Falih and his Russian counterpart Alexander Novak will meet again for further consultations in Riyadh later this month, according to a statement from the Saudi Energy Ministry.

Supply and demand could come back into balance earlier than expected if Opec's agreement to curb output is implemented, the International Energy Agency said Tuesday.