Singapore - Oil prices rose above $68 a barrel on Tuesday with investors perched on the fence ahead of an Opec meeting on Wednesday, which analysts believe may see more rhetoric on compliance but no change in output targets.
The Organisation of Petroleum Exporting Countries (Opec) meets in Vienna on Wednesday, with most analysts expecting the producer group, the source of more than a third of the world's oil supply, to maintain its official output target stable around $70.
"The market is looking for reasons to sell oil, and after the Opec meeting might be a decent excuse. People are worried by under-compliance, the disappointing US driving season, anaemic demand and high stock levels," ANZ's senior commodities analyst Mark Pervan said.
"That's not a positive scenario for oil and near term, investors will want to take a lighter position. Direction after that will continue to to come from equities."
Nymex crude for October delivery stood at $68.33 a barrel by 05:40, up 31 cents from Friday's close. There was no settlement price on Monday because Nymex was closed for the US Labour Day holiday.
London Brent crude rose 44 cents to $66.97 a barrel.
Crude prices, although up 50% so far this year, are still less than half their peak struck in July 2008, and consumers and producers are happy with that, Saudi Arabia's oil minister Ali al-Naimi said on Tuesday.
Naimi described the oil market as "steady and in good shape," although when asked if oil inventories were too high, said "Yes, they are a little bit."
But compliance with output targets remains an issue, a trader in Singapore noted, adding that the organisation could step up calls to heed quotas from its more wayward members.
"Compliance, or rather the lack of it, is a problem for Opec. They need to bring some of the over-producers back in line and that's what this meeting will be about," ANZ's Pervan said.
He added: "Compliance is pretty lax. They will push for a much greater degree. It really needs to rise from mid-70% to a high 80%. Russia tweaking up output is probably not helping prices either."
The global recovery's speed
Oil prices, which fell 6.5% last week, have been trading in a range between $65 and $75 a barrel since the start of August, with prices swinging on economic data as investors seek clues about the speed of a recovery from the recession.
Investors will be on watch for inventory data - delayed by a day this week due to Monday's holiday.
The American Petroleum Institute's petroleum stocks report will be delayed one day to Wednesday, September 9, at 22:30 and Energy Information Administration snapshot of crude oil, distillates and gasoline stocks will be pushed out to Thursday, September 10, at 17:00.
"The big thing is distillate stocks, which are quite high," National Australia Bank's commodities economist Ben Westmore said.
"People are assessing economic indicators - industrial production and so on to see if the supply overhang will be redressed any time soon."
Traders will also keep an eye out as Tropical Storm Fred formed in the eastern Atlantic Ocean on Monday with top winds of 65 kph, but did not immediately threaten any land, the US National Hurricane Center said.
- Reuters