Oil prices slipped on Thursday ahead of a key Organization of the Petroleum Exporting Countries (OPEC) meeting to decide production policy at a time of huge global oversupply.
Today, OPEC is expected to keep a group output target of 30 million barrels per day (bpd), a ceiling it has been exceeding for most of the last two years, weakening prices.
The cartel is now pumping about 2 million bpd more than needed, analysts say.
Analysts say the oversupply has brought a glut that has left millions of barrels stored on tankers without a buyer and kept prices at close to half their peak levels in 2014.
Brent for July LCOc1 was down 55 cents at $63.25 a barrel while the U.S. crude futures CLc1 were 45 cents lower at $59.19.
“A roll-over in OPEC’s production target is built into prices,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
“Given the exciting fundamental backdrop, volatility is all but guaranteed.”
Energy advisers, Wood Mackenzie, echoed the views of many analysts, saying it was unlikely OPEC would agree to cut output and the group’s crude output was likely to stay above its 30 million bpd production ceiling through 2016.
Wood Mackenzie expects Brent to average $60 a barrel in 2015 and $70 in 2016.
But IHS Energy said it expected no reversal of the producer group’s policy of keeping production high in defence of market share instead of cutting output to support prices.
“Although surprises from OPEC can never be ruled out, prospects for a policy reversal at this time range from slim to non-existent.
“Saudi Arabia and its Gulf allies, which last November instigated the policy of defending market share instead of prices, appear resolved to persist with it,” said Bhushan Bahree, senior director at IHS Energy.
Strong global fuel demand has helped support oil prices in spite of the glut.
In China, almost 2 million new cars are sold every month despite its economic slowdown.
Demand is also strong in Europe.