London: Brent crude oil fell to near $73 (Dh268) a barrel as Opec and its allies inched closer to reaching an agreement on relaxing output curbs at a meeting in Vienna this week.

Futures in London for August delivery dropped 1.9 per cent. Saudi Arabia’s energy minister said the group needs to release more oil to the market, while his Iranian counterpart — who earlier in the week rejected any proposal to boost output — said he was optimistic about the outcome of OPEC’s meeting Friday. Brent’s premium to West Texas Intermediate narrowed to its smallest level in three weeks as the drop in the global benchmark outpaced those in US futures.

Oil has traded in a narrow range this month as investors await a decision by the Organisation of Petroleum Exporting Countries and its allies on whether to ease production curbs that have helped reduce a global glut. As delegates head into what may be one of the most contentious meetings in years, Saudi Arabian Energy Minister Khalid Al Falih voiced his support for lifting output, but said the extent of increases still needs to be agreed upon.

Oil prices are “drifting lower on the expectation that they will come to an agreement,” says Ole Hansen, head of commodity strategy at Saxo Bank A/S. “If they agree to bring compliance back towards 100 per cent and increase production by around 600,000 barrels a day, that will confirm that we probably have a top in the market.”

Tight range

Brent futures for August settlement fell as low as $1.76 to $72.98 a barrel before trading at $73.32 at 11:07am in London on the ICE Futures Europe exchange. Total volume traded was about double the 100-day average.

West Texas Intermediate crude for August delivery traded at $64.59 a barrel on the New York Mercantile Exchange, down $1.12. The US benchmark traded at an $8.74 discount to Brent, having earlier narrowed as tight as $8.45, the smallest since May 30.

Producer meeting

Iran is showing signs of wavering on its opposition to a supply increase. Oil Minister Bijan Namdar Zanganeh said he was optimistic about Opec’s gathering, after speaking with several counterparts as well as Russian Energy Minister Alexander Novak on Wednesday. Opec’s third-largest producer earlier in the week clashed with Saudi Arabia, rejecting a potential compromise that could see a modest oil-output increase.

Saudi Arabia’s Al Falih said the group on Thursday will discuss “how to release a certain number of additional supply.” One compromise floated earlier was for a 300,000-to-600,000 barrel-a-day hike in the latter half of the year. Russia, responsible for more than half of the supply cuts pledged by a group of non-Opec producers, pushed for an even larger quota expansion of 1.5 million barrels a day.