By Jenny W. Hsu

After early weakness, oil futures moved into the green by midday Monday in Asia trading as investors seem to be increasingly confident that Nigeria and Libya will be added to the production-cap deal orchestrated by the Organization of the Petroleum Exporting Countries.

Early trading saw Friday's 2% declines be extended, helped on by data regarding robust OPEC output.

But in recent trading, light, sweet crude futures for delivery in September traded up 0.2% at $45.85 a barrel in the Globex electronic session and September Brent crude on London's ICE Futures exchange 0.3% to $48.18.

Global prices have been in the doldrums for three years as supply has outpaced demand, sending stockpiles to record levels. Even though the OPEC-Russia curtailment deal has been in force since January, global inventories have barely fallen. That's resulted in heavy pressure remaining on prices.

Beyond continued growth in U.S. oil production, with total output reaching its highest level in 2 years, some speculate the reason why the OPEC deal hasn't been effective is because Nigeria and Libya have seen their own output rebound faster than expected. They are the two OPEC members exempt from the deal, but there has been a growing voice among producers that these African nations should also be included.

A decision on that issue is expected to announced soon after the OPEC meeting concludes later today. There have been reports that Russia is lobbying hard to bring the two suppliers into the fold.

However, it remains to be seen if capping Nigerian and Libyan output at current levels will make a material difference because the move wouldn't remove barrels from the market--just keep additional ones off it.

"Unless we see demand pick up pace, imposing a production cap on Nigeria and Libya will only be a 'feel-good' move but not helpful in readjusting the supply-and-demand dynamic in the short run," said Gao Jian, a SCI International energy analyst.

OPEC Secretary General Mohammad Barkindo, however, recently outlined a rosier picture, saying the rebalancing is "bound to accelerate in the second half."

On the product front, August Nymex reformulated gasoline blendstock was flat $1.5630 a gallon, diesel rose 0.4% to $1.5208 and ICE gasoil fell 0.6% to $450.25 a metric ton.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

July 24, 2017 00:09 ET (04:09 GMT)

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