Oil prices slip ahead of OPEC meeting

Oil prices slipped on Thursday ahead of a key OPEC meeting to decide production policy at a time of huge global oversupply.

The Organization of the Petroleum Exporting Countries is expected on Friday to keep a group output target of 30 million barrels per day (bpd), a ceiling it has been exceeding for most of the last two years, weakening prices.

The cartel is now pumping about 2 million bpd more than needed, analyst say, feeding a glut that has left millions of barrels stored on tankers without a buyer and kept prices at close to half their peak levels last year.

Brent for July was down 55 cents at USD 63.25 a barrel by 0810 GMT. US crude futures were 45 cents lower at USD 59.19.

"A roll-over in OPEC's production target is built into prices," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. "Given the exciting fundamental backdrop, volatility is all but guaranteed."

Energy advisors Wood Mackenzie echoed the views of many analysts, saying it was unlikely OPEC would agree to cut output and the group's crude output was likely to stay above its 30 million bpd production ceiling through 2016.

Wood Mackenzie expects Brent to average USD 60 a barrel in 2015 and USD 70 in 2016.

IHS Energy also said it expected no reversal of the producer group's policy of keeping production high in defence of market share instead of cutting output to support prices.

"Although surprises from OPEC can never be ruled out, prospects for a policy reversal at this time range from slim to non-existent. Saudi Arabia and its Gulf allies, which last November instigated the policy of defending market share instead of prices, appear resolved to persist with it," said Bhushan Bahree, senior director at IHS Energy.

Strong global fuel demand has helped support oil prices despite the glut. In China, almost 2 million new cars are sold every month despite its economic slowdown.

Demand is also strong in Europe. Goldman Sachs said Europe's high diesel consumption was a risk to the bank's bearish Brent outlook of USD 58 per barrel for 2015 and USD 62 for next year.

European diesel demand growth reached 7.2 percent in the first quarter, or 420,000 bpd, compared with a year before, close to the highest rate seen in the past 30 years, Goldman said.