An oil refinery worker. Picture: REUTERS/DARREN WHITESIDE
An oil refinery worker. Picture: REUTERS/DARREN WHITESIDE

Tokyo — Oil slipped in early Asian trade on Friday, with US crude moving further away from a two-month high after the Organization of the Petroleum Exporting Countries (Opec) agreed to increase output curbs in early 2020 but failed to promise further steps after March.

Brent futures were down 21c, or 0.3%, at $63.18 by 2.58am GMT.

West Texas Intermediate oil futures fell 14c, or 0.2%, to $58.29 a barrel. They hit $59.12 a barrel on Thursday, the highest since the end of September.

Opec and allies including Russia — a grouping known as Opec+ — agreed to more output cuts to avert oversupply early in 2020 as economic growth stagnates amid the US-China trade war.

The agreement, which needs to be formally adopted later on Friday, will cut an extra 500,000 barrels per day (bpd) of production, through tighter compliance and some adjustments. The group has been withholding 1.2-million bpd and the increased amount represents about 1.7% of global oil output.

The “decision seems to be more of a housekeeping move that will narrow the gap between their current target and the over-compliance we have seen from the alliance,” said Edward Moya senior market analyst at Oanda.

A panel of ministers representing Opec and non-Opec producers led by Russia recommended the cuts, according to Russia energy minister Alexander Novak on Thursday.

Details need to be hammered out at an Opec+ meeting that starts later on Friday in Vienna.

Any price gains from the Opec+ output cut are likely to benefit US producers not party to any supply curbing agreement. US drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.

“North American shale supply will continue growing even in an environment with lower oil prices,” Rystad Energy said in a note.

Higher oil prices are also supporting the initial public offering (IPO) of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.

The sale was the world's biggest IPO, beating Alibaba Group Holdings’ $25bn listing in 2014, but fell short of valuing Aramco at $2-trillion, a target sought by Saudi Crown Prince Mohammed bin Salman.

Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.

Reuters