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Oil prices stable in cautious trading ahead of OPEC meeting

A drop of diesel is seen at the tip of a nozzle after a fuel station customer fills her car's tank in Sint Pieters Leeuw December 5, 2014. REUTERS/Yves Herman/Files

By Henning Gloystein

SINGAPORE (Reuters) - Oil markets stabilized in cautious trading on Friday ahead of an OPEC decision that is likely to keep the market oversupplied, setting aside warnings of a second price fall as some members like Iraq and Iran look to ramp up exports.

Saudi Arabia's oil minister Ali al-Naimi said he was 100 percent comfortable with the oil market, the Saudi-owned al-Hayat newspaper reported on Friday.

However, traders said market participants were reluctant to take on new positions ahead of a final decision from OPEC as a surprise outcome could have a huge impact on crude markets.

Prices tumbled 5 percent over the previous two sessions as investors looked for the global oversupply to continue.

"Prices came under pressure as Iraq ... exports are now expected to rise approximately 5 percent in June as various fields boost output," ANZ said.

With fundamentals little changed, prices on Friday were largely flat with their last settlements.

Front-month Brent futures were trading at $62.06 per barrel at 0556 GMT on Friday, a mere three cents above their last settlement. U.S. crude futures were flat at $58.

Overall market fundamentals remain weak, with millions of barrels of crude loaded in tankers waiting for buyers.

By agreeing to maintain its existing output ceiling, the Organization of the Petroleum Exporting Countries (OPEC) would continue to support the world's top exporter Saudi Arabia, which last year said it would not cut production to keep prices high, triggering the biggest price fall since the financial crisis of 2008.

With oil prices having rebounded by more than a third after hitting a six-year low of $45 a barrel in January, OPEC officials in Vienna see little reason to tinker with a strategy that seems to have resurrected moribund growth in oil consumption and put a damper on the U.S. shale boom.

Despite the oversupply, some traders expected a fall in U.S. rig activity to soon begin to translate into lower production.

Renowned oil trader Andy Hall expects U.S. crude prices to rise above $65 a barrel despite the high global production of oil, citing the drop in the U.S. oil rig count as a factor.

"Despite a collapse in rig counts in the U.S., oil production has yet to register a sustained decline. But it will come," Hall said in a monthly letter to investors in his $3.3 billion Connecticut-based hedge fund Astenbeck Capital Management.


(Editing by Tom Hogue and Richard Pullin)