A gas flare burns at Russian oil refinery, operated by OAO Lukoil. in Russia. Picture: BLOOMBERG
A gas flare burns at Russian oil refinery, operated by OAO Lukoil. in Russia. Picture: BLOOMBERG

London — Oil prices rose for a second day on Tuesday and volatility subsided to its lowest in three weeks, as investors prepared for a key meeting of the oil cartel Opec producer group next week.

Crude remained in a tight trading range, in line with the broader financial markets, which were largely unruffled by a US-North Korea summit aimed at de-nuclearisation of the Korean peninsula.

Brent crude futures were up 17c at $76.63 a barrel by 8.55am GMT, while US West Texas Intermediate (WTI) crude futures rose 11c to $66.21.

"The market has been range-bound for two weeks and that is likely to remain the case," Ole Hansen, senior manager at Saxo Bank, said.

Opec, together with partners including Russia, has cut oil output by 1.8-million barrels per day (bpd) since January 2017 in an effort to boost the market. Volatility in oil prices has subsided due to caution around the group’s meetings scheduled for June 22-23, at which it will decide on future supply policy.

With US sanctions threatening to cut Iranian exports and the potential for more declines in Venezuelan production, Opec kingpin Saudi Arabia and Russia have indicated they would be willing to raise output to make up for any supply shortfall.

Russian production reportedly climbed to 11.1-million bpd in early June. In the US, output has risen by almost a third in the last two years, to a record 10.8-million bpd.

Top exporter Saudi Arabia — which has so far led Opec’s efforts to withhold supplies — is also showing signs of raising production.

In physical oil markets, Middle East light crude grades are set to trade at discounts against their respective official selling prices amid ample supplies to Asia, including from the US, four trade sources said.

Saudi Arabia has told Opec that the country increased oil output to a little more than 10-million bpd in May, from 9.9-million bpd in April.

Said Greg McKenna, chief market strategist at futures brokerage AxiTrader, "This fits with the theory that the Saudis and Russians are subtly moving toward a change to the agreement at this month’s meeting."