Oil pares gains in volatile trade ahead of OPEC meet

By Jessica Resnick-Ault

NEW YORK (Reuters) – Oil prices were largely steady in highly volatile trade on Friday, with Brent briefly reaching $80 per barrel, ahead of this weekend’s meeting between OPEC and non-OPEC producers to discuss how to counter falling supply from Iran due to U.S. sanctions.

The Organization of the Petroleum Exporting Countries and its allies were discussing the possibility of raising output by 500,000 barrels per day, a source familiar with the discussions told Reuters.

The major producers are scheduled to gather in Algeria on Sunday.

Earlier in the session, prices jumped after a report said that OPEC and non-OPEC countries pumped less oil in August compared with July due to a drop in Iranian crude supply.

“Iranian crude exports are coming (down) earlier and bigger than expected, at a time seasonal demand is strong. With spare capacity also falling sharply, the market remains exposed to supply-induced price shocks,” ANZ Bank analysts said in a note to clients.

Investors piled into the trade, betting that OPEC will be unable to compensate fully for the loss of oil from Iran, OPEC’s third-biggest producer.

Brent crude oil () was up 13 cents at $78.83 a barrel by 11:27 a.m. EDT (1527 GMT) after earlier touching a session high of $80.12. U.S. light crude () was up 20 cents at $70.52, after earlier touching a high of $71.80.

Jason Gammel, analyst at U.S. bank Jefferies, said he expects Saudi Arabia to try to keep the oil market adequately supplied into 2019, “but at the cost of spare capacity”, a key supply buffer to prevent oil price volatility.

“Spare capacity could fall below 1 percent of demand by year-end if Iranian exports fall below 1 million barrels per day, as now seems likely,” Gammel said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.