Oil prices held steady on Tuesday with investors perched on the fence ahead of an OPEC meeting on Wednesday, which analysts believe may see more rhetoric on compliance but no change in output targets.
The Organization of Petroleum Exporting Countries (OPEC) meets in Vienna on Wednesday, with most analysts expecting the producer group, the source of more than a third of the world's oil supply, to maintain its official output target stable around $70.
The market is looking for reasons to sell oil, and after the OPEC meeting might be a decent excuse. People are worried by under-compliance, , the disappointing U.S. driving season, anemic demand and high stock levels, ANZ's senior commodities analyst Mark Pervan said.
That's not a positive scenario for oil and near term, investors will want to take a lighter position. Direction after that will continue to come from equities.
NYMEX crude for October delivery stood at $68.29 a barrel by 0244 GMT, up 29 cents from Friday's close. There was no settlement price on Monday because NYMEX was closed for the U.S. Labor Day holiday.
London Brent crude rose 50 cents to $67.03 a barrel.
But compliance with output targets remains an issue, a trader in Singapore noted, adding that the organization could step up calls to heed quotas from its more wayward members.
Compliance, or rather the lack of it, is a problem for OPEC. They need to bring some of the over-producers back in line and that's what this meeting will be about, he said.
ANZ's Pervan: Compliance is pretty lax. They will push for a much greater degree. It really needs to rise from mid-70 percent to a high 80 percent. Russia tweaking up output is probably not helping prices either.
August oil output rose to 9.97 million barrels per day, up 0.6 percent from 9.91 million bpd in July, Russia's. Output was up 1.5 percent from 9.82 million bpd in August 2008.
Oil prices, which fell 6.5 percent last week, have been trading in a range between $65 and $75 a barrel since the start of August, with prices swinging on economic data as investors seek clues about the speed of a recovery from the recession.
Investors will be on watch for inventory data -- delayed by a day this week due to Monday's holiday.
The American Petroleum Institute's petroleum stocks report will be delayed one day to Wednesday, September 9, at 4:30 p.m. EDT (2030 GMT) and Energy Information Administration snapshot of crude oil, distillates and gasoline stocks will be pushed out to Thursday, September 10, at 11 a.m. EDT (1500 GMT).
The big thing is distillate stocks, which are quite high, National Australia Bank's commodities economist Ben Westmore said.
People are assessing economic indicators -- industrial production and so on to see if the supply overhang will be redressed any time soon.
Traders will also keep a weather eye on a new tropical depression that has formed in the far eastern Atlantic Ocean and is expected to strengthen into a tropical storm, the U.S. National Hurricane Center said.
At 5 p.m. (2100 GMT) on Monday, the depression was located about 160 miles south of the southernmost Cape Verde islands and its maximum sustained winds were near 35 mph, the center said.