Oil prices perk up on talk of OPEC production cut

A rally in oil prices after a two-month slide indicates traders are betting that OPEC and its allies including Russia will agree to produce less crude.

Representatives of oil-producing nations will hold a highly anticipated meeting Thursday in Vienna, with analysts predicting that they will agree on a cut of at least 1 million barrels a day in an effort to bolster prices.

Russian President Vladimir Putin boosted expectations for a deal when he said at the G20 summit over last weekend that Russia and Saudi Arabia have agreed to extend an attempt by OPEC to balance oil supply and demand — although he provided no figures.

Crude prices began falling in October and continued to plunge last month due to oversupply and fears that weaker global economic growth would dampen energy demand. The price of both benchmark U.S. crude and the standard for internationally traded oil fell 22 percent in November.

Oil prices rose ahead of an OPEC meeting on Thursday, where members are expected to agree to cut output in 2019. Benchmark U.S. crude gained 0.6 percent to settle at $53.25 per barrel in New York. Brent crude, the international standard, added 0.6 percent to close at $62.08 per barrel in London.

The Alberta premier announced that the Canadian province will trim production by 8.7 percent because of a shortage of pipeline capacity.

Finally, the small but wealthy Persian Gulf nation of Qatar said Monday that it will leave OPEC in January. Qatar has been feuding with Saudi Arabia and other Arab nations that accuse it of financing terrorism.

Qatar is one of the smallest oil producers in OPEC, so its departure will have only a marginal impact on the cartel’s share of the world’s supply. Still, the surprising announcement underscores the political tension within OPEC, “which doesn’t necessarily make it easier to come to a decision” on cutting production, said JBC Energy analyst David Wech.

Some analysts expect OPEC and Russia will agree to even larger cuts, about 1.5 million barrels a day. Anything less, they say, could send oil prices lower.

OPEC must produce “a credible agreement” to cut output by about 1.5 million barrels a day for oil prices to recover their recent losses, Credit Suisse analyst William Featherston wrote in a note Monday. Saudi Arabia’s decision is complicated by President Trump’s desire for lower prices and the Saudis’ wish to improve relations with the U.S. after the murder of regime critic Jamal Khashoggi.

Motorists have enjoyed a break from rising gasoline prices over the past two months, but that road is about to hit a dead end if OPEC succeeds in boosting oil prices. In the U.S., the national average stood Tuesday at $2.43 a gallon, down nearly 50 cents from the start of October, according to pricetracker GasBuddy.

“That’s an extra $200 million that Americans haven’t left at the pump,” said GasBuddy analyst Patrick DeHaan.