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Oil prices rise in nervous trading ahead of OPEC meeting

A gas flame is seen in the desert near the Khurais oilfield, Saudi Arabia June 23, 2008. REUTERS/Ali Jarekji/File Photo

A gas flame is seen in the desert near the Khurais oilfield, Saudi Arabia June 23, 2008.

Oil markets edged up in nervous trading on Wednesday ahead of an OPEC meeting later in the day, with members of the producer cartel trying to thrash out an output cut to curb oversupply that has seen prices more than halve since 2014.

International Brent crude was trading at $46.85 per barrel at 0603 GMT, up 47 cents, or 1 percent, from its last close.

U.S. West Texas Intermediate (WTI) crude was up 29 cents, or 0.6 percent, at $45.52 a barrel.

Traders said markets were jittery, and that prices could sharply swing either way depending on developments at the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna.

Oil dropped nearly 4 percent the previous session over disputes between Saudi Arabia, Iran and Iraq regarding details of the planned cut.

Despite the disagreements, most analysts still expect some form of deal.

"We expect OPEC will reach an agreement ... We believe OPEC's resolve in reaching an agreement remains strong," ANZ bank said.

Analysts at Goldman Sachs, Barclays, and ANZ agree that oil prices would quickly rise above $50 per barrel should OPEC come to an agreement. Without a deal, the consensus is for a fall to the low $40s.

Iran and Iraq are resisting pressure from Saudi Arabia to curtail production, making it hard for the group to reach a deal.

Iranian Oil Minister Bijan Zanganeh told reporters upon arrival at OPEC's headquarters in Vienna that his country was not prepared to reduce output: "We will leave the level of production (where) we decided in Algeria."

OPEC, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap output around 32.5-33 million bpd versus the current 33.64 million bpd to prop up prices.

OPEC said it would exempt Iran, Libya and Nigeria from cuts as their output had been crimped by unrest and sanctions.

One of the biggest OPEC concerns is that by cutting output it would simply hand over market share to non-OPEC competition.

There are strong indicators that such concerns are warranted: U.S. shale drillers have radically slashed production costs in the last few years, to now between $35 and $40 per barrel.

A potential compromise would be for OPEC to return to some form of production quota, instead of ordering outright cuts.

Although that would do nothing to end a glut in which more crude is produced than consumed, it would potentially help balance the market in the long-term as rising demand would gradually bring consumption to output levels.