Oil prices regained some ground after steep losses made since Friday in choppy trading ahead of a planned producer meeting on Wednesday aimed at reining in global oversupply.
Brent crude futures were trading at $47.20 per barrel at 03:46 GMT, down 4 cents from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 3 cents at $46.03 a barrel.
The recovery came after prices fell more than 3% on Friday, and further still early on Monday.
While still down from their last settlement, it was a recovery from early Monday lows of $46.28 and $45.14 per barrel for Brent and WTI, respectively. Prices had tumbled over disagreement between the Organization of the Petroleum Exporting Countries and non-OPEC exporters like Russia over who should cut production by how much in order to curb a global supply overhang that has more than halved prices since 2014.
Despite the wrangling, traders said they still expected some form of an output restriction to be agreed this week.
“I hold a very strong view, that the fiscal imperative of the budget and income/expenditure situation of the Saudis together with many other OPEC and non-OPEC nations means a deal will get done,” said Greg McKenna, chief market strategist at Australian brokerage AxiTrader.
OPEC will meet in Vienna on Wednesday to decide on the details of a cut, potentially including non-OPEC members like Russia. A meeting between OPEC and non-OPEC producers that was to be held on Monday was called off after Saudi Arabia declined to attend.
Referring to Saudi Arabia’s move, Morgan Stanley said “canceling a meeting with non-OPEC producers highlights the disagreements that remain within OPEC.” But the bank said it still expected “at least a paper deal agreement.”
Saudi Arabia’s energy minister Khalid al-Falih said on Sunday that Saudi representatives would not attend the talks originally scheduled for Monday was because no agreement within OPEC had been reached so far.
Falih said that the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.
“With Saudi Arabia communicating to the market that they were somewhat bullish about a pickup in demand throughout 2017, they have essentially prepared (the) market (for) non-agreement,” said Gary Huxtable, of investment advice company Atlantic Pacific Securities.
Beyond the planned output cut, Morgan Stanley said that the strong U.S.-dollar was a key oil price driver.
“Although Brent is down 57% since 2012, a 30% rise in the trade-weighted U.S.-dollar has helped offset the impact for many producers…This FX effect has helped some producers lower their cost curve,” Morgan Stanley said.