Oil prices fell slightly on Wednesday amid investor doubts that OPEC will agree to a production cut large enough to make a significant dent in the global glut of crude as U.S. drilling rises.
Members of the Organization of the Petroleum Exporting Countries (OPEC) will meet next week on Nov. 30 in Vienna to decide on the details of an agreement to cut output that the group has been trying to hammer out since September.
Oil prices fluctuated throughout the day, starting lower in the morning and later briefly turning positive after the Energy Information Administration said U.S. crude stocks unexpectedly fell 1.3 million barrels last week after three straight weeks of builds.
Reports that U.S. drillers added rigs this week tempered the gains ahead of the settlement.
In the U.S. market, West Texas Intermediate (WTI) crude oil futures
Brent crude futures
Calendar spreads, the difference in price between one month and the next in the futures market, showed little signs that traders are pricing in a big change in market fundamentals.
The front to second-month WTI calendar spread
The WTI cash roll, which allows physical traders to roll long positions forward, traded down to negative $1.80 a barrel on Tuesday, the weakest since March.
All are indications that traders expect little change in oversupply in the market in the near term.
"Looking at the forward curve, the spread has gotten substantially weaker on the WTI side ... so that's bearish and pressures the front of the curve," said Tariq Zahir, an analyst at Tyche Capital Advisors in New York.
"There's going to be some cut, but is Saudi Arabia really going to take the lion's share of the cut?"
Doubts remain over whether the group will agree to a proposed cut of 4 percent to 4.5 percent that has been discussed. That would imply a supply cut of more than 1.2 million barrels per day, according to Reuters calculations.
Iraq has been one of the more reluctant members to agree to a cut, but Prime Minister Haider al-Abadi told reporters on Wednesday in Baghdad that they were willing to lower their output.
Separately, non-OPEC member Russia has said it would cut production, but domestic oil companies have not worked out details, muddying the outlook for cutting output.
U.S. oil drillers added rigs this week, as shale producers boost spending to capture forecast higher crude prices in coming months. The increase thus far in November is the largest since July.
Drillers added three oil rigs in the week to Nov. 23, bringing the total count up to 474, the most since January, but still below the 555 rigs seen a year ago, energy services firm Baker Hughes Inc