NEW YORK - Oil traded up slightly in a volatile session on Friday, supported by expectations that the Organisation of the Petroleum Exporting Countries would agree to cut output next month, though prices were set to for a weekly drop on underlying oversupply worries.
OPEC kingpin Saudi Arabia is keen for the major producers to cut output by about 1.4 million barrels per day, around 1.5 percent of global supply, to support the market, sources told Reuters this week. But other producers, including Russia, have been reluctant to agree to a cut.
Brent <LCOc1> was up 19 cents, or 0.3 percent, at $66.81 a barrel by 1:39 p.m. EDT (1839 GMT). The global benchmark looked set for a third day of gains since hitting an eight-month low on Tuesday, but was down more than 4.7 percent on last week's close.
U.S. crude <CLc1> rose 8 cents, or 0.1 percent, to $56.54 a barrel after earlier hitting a session high of $57.96 and falling to as low as $55.89 a barrel. The contract had its steepest one-day loss in more than three years on Tuesday. U.S. crude is on track to fall nearly 6 percent in the week, the sixth straight week of declines.
After Tuesday's sharp fall, the market was due for a slight correction, and is now stabilizing, said Tariq Zahir, managing member at Tyche Capital Advisors in New York.
"A relief rally was in the cards," said Bob Yawger, director of energy futures at Mizuho in New York. OPEC is likely to be spurred to action as U.S. production continues to climb, he said.
Still, the day's gains were likely to be limited as traders were cautious going into the weekend, he said. "It would take a brave soul to go home really long this weekend considering the slaughter we've had in the past eight weeks."
OPEC ministers meet on Dec. 6 in Vienna to decide on production policy for the next six months amid a growing surplus in world markets.
U.S. crude production <C-OUT-T-EIA> reached another record last week, at 11.7 million barrels per day, government data showed. The record output contributed to the biggest weekly build in U.S. crude stockpiles <C-STK-T-EIA> in nearly two years.
U.S. drillers added two oil rigs this week, bringing the total count to 888, still the highest level since March 2015, General Electric Co's <GE.N> Baker Hughes energy services firm said in its closely followed report . <RIG-OL-USA-BHI> The rig count is seen as an indicator of future production growth.
The United States imposed sanctions on Iranian oil exports this month and Iranian crude exports have fallen sharply in recent months, although Washington cushioned the blow by granting some temporary exemptions.
Other oil producers have more than compensated for the lost Iranian oil and most analysts now see a significant supply surplus with inventories building, putting pressure on prices.
Fearing a repeat of the 2014 price rout, OPEC is widely expected to start trimming output soon.
This could produce a swift price rebound, some analysts say, especially if production falls further in Venezuela and Libya.
"We are likely from December onwards to have at least 1 million barrels per day (bpd) less of (Iranian) crude exports," Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told Reuters Global Oil Forum.
Tchilinguirian said he would not be surprised if Brent recovered to $80 this year.
Also supporting prices, Iraq resumed exporting oil from its northern Kirkuk oilfields on Friday, pumping 50,000-100,000 bpd, an oil ministry spokesman said. Some analysts had expected the volumes to be much higher, at closer to 300,000 bpd.