SINGAPORE: Brent crude held above $108 a barrel on Wednesday as OPEC reduced oil supply, although rising output from the United States and uncertainty about its budget for next year limited price gains.
OPEC's production declined in November, led by a cut in Saudi Arabian output, as the group reined back supply in line with the official target at 30 million barrels per day (bpd).
January Brent crude rose 36 cents to $108.37 a barrel by 0301 GMT, up for a third day. US crude for January edged up 18 cents to $85.97 after rising for the first time in six trading sessions on Tuesday.
"The outlook for energy demand will not be as powerful. They (OPEC) might start talking about quotas and that could support prices," said Jonathan Barratt, chief executive officer at Barratt's Bulletin, a Sydney-based research firm.
The group has been widely expected to retain its output target when it meets on Wednesday and argue instead about who should be the group's next secretary-general.
Saudi Arabia increased supply earlier in the year to replace the one-million-bpd drop caused by Western sanctions against Iran for its nuclear programme.
But OPEC may soon have to review its production target on a weak demand growth outlook next year, analysts say.
OPEC warned on Tuesday that world oil demand growth could underperform in the first half of 2013 due to economic weakness.
Despite OPEC's supply cut, crude production in the United States is rising at the fastest rate in history toward a 20-year high next year thanks to a shale oil revolution, the US Energy Information Administration said.
The world's largest oil consumer is expected to produce 7.1 million bpd in 2013, up 11 percent from this year, further reducing its need for imports.
US crude oil stockpiles are expected to have fallen last week, while distillate and gasoline stockpiles increased, a Reuters survey of analysts showed ahead of EIA's data to be released later on Wednesday.
Oil prices also gained support from a weaker dollar pressured by expectations of more stimulus from the Federal Reserve. A weaker greenback makes dollar-denominated commodities more affordable for holders of other currencies.
The Fed will unveil plans to purchase $45 billion more bonds every month, on top of the $40 billion it announced in September, to bring down unemployment. ?Reuters
Center>Copyright Reuters, 2012
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