Oil dropped on Friday, but were set for weekly gains ahead of the OPEC+ meeting which kicked off Friday in Vienna.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – a grouping known as OPEC+ – agreed on Thursday to more output cuts to avert oversupply as economic growth stagnates amid the U.S.-China trade war.
But OPEC stopped short of pledging action beyond March and analysts have questioned the impact of the latest curbs.
Brent futures were down 18 cents at $63.21, but are set to rise 1.5 percent on the week.
West Texas Intermediate oil futures fell 33 cents to $58.10 a barrel. They are set to rise nearly 6 percent on the week.
The cuts next year will expand the existing agreement by an extra 500,000 barrels per day (bpd) reduction in the first quarter next year, through tighter compliance and some adjustments.
OPEC’s current agreement is a supply cut of 1.2 million bpd and the increased amount represents about 1.7 percent of global oil output.
“If we were to have an outcome of an extension of cuts with only the official quota of the OPEC+ group being reviewed lower (the 500,000 bpd), rather than actual production, then the change in supply policy would be cosmetic (given below target production in some countries, notably Saudi Arabia and Angola),” said Harry Tchilinguirian, global oil strategist at BNP Paribas.
OPEC is likely to shoulder 340,000 bpd in fresh cuts and non-OPEC producers an extra 160,000 bpd, one source said on Friday.
Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.
“North American shale supply will continue growing even in an environment with lower oil prices,” Rystad Energy said in a note.
Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.
The sale was the world’s biggest initial public offering (IPO), beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of a $2 trillion valuation for Aramco sought by Saudi Crown Prince Mohammed bin Salman.
Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.