Oil prices inch up as producers meet on output agreement

Oil prices were narrowly higher on Friday as the market waited to see whether major oil producers would back an extension to output cuts beyond March at a meeting in Vienna, reports Reuters.

Brent crude futures were at $56.51 a barrel at 0725 GMT, up 6 cents, or 0.11 per cent, from their last close.

US West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 per cent, at $50.65 per barrel.

Some ministers from the Organisation of the Petroleum Exporting Countries and from other producers are set to meet in Vienna at 0900 GMT on Friday to discuss a possible extension of an oil supply cut deal that is aimed at supporting oil prices.

An OPEC source told Reuters the meeting had been postponed from 0800 GMT.

The ministers from OPEC nations and others led by Russia will discuss a possible extension to an agreement under which producers are cutting output by 1.8 million barrels per day (bpd). They are also expected to discuss the idea of monitoring exports to assess compliance.

Goldman Sachs said that talks over extending cuts are "noteworthy but premature", adding "we believe it is unlikely that the committee will recommend extension of cuts this week."

Michael McCarthy, chief market strategist at CMC Markets in Sydney, predicted there will be "strong rhetoric but whether or not they will be able to boost oil prices from current high levels is another question".

There will be some focus on whether Nigeria and Libya, who have been exempt from the output cuts, will join any future efforts. The two OPEC members have both been invited to Friday's meeting.

Another report from Singapore adds: Two South Korean refiners are exporting excess cargoes of residual fuel oil to nearby China, displacing some Singaporean sales of the commodity which can be used in ships and power stations, three trade sources said.

Scheduled maintenance work at S-Oil Corp's Onsan plant in September and a fire at GS Caltex's Yeosu refinery in August has curbed the facilities' capacity to refine residual fuel oil into other products, meaning they have been shipping excess cargoes to China, the sources said.

They declined to be identified as they were not authorized to speak with media.

S-Oil did not respond to a request for comment, while a GS Caltex spokesman declined to comment.
The sources estimate GS Caltex, the nation's No.2 refiner, has exported between 100,000 and 200,000 tonnes of residual fuel oil as a result of the fire, mostly to China.

S-Oil, the country's third-biggest refiner, is estimated to have exported 120,000 tonnes of 380-cantistoke fuel oil into China in September for use as a marine fuel through three 40,000 tonne cargoes. That has pushed out some exports from Singapore, the sources said.

"The drawing power from Singapore into the north seems less (after the secondary-unit closures at the two South Korean refineries)," said a Singapore-based fuel oil trader.

GS Caltex is exporting most of its excess fuel oil cargoes since the unit shutdown to China at the expense of Singaporean exports to China, said a trade source in South Korea.