By Jenny W. Hsu

Global crude futures veered upward in early Asia trade Friday following the overnight decline, but market sentiment remains cautious as major oil producers have made little progress on the proposed production cut deal.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in December traded at $44.76 a barrel at 0303 GMT, up $0.10 in the Globex electronic session. January Brent crude on London's ICE Futures exchange rose $0.10 to $46.45 a barrel.

"The slight price correction is a technical rebound caused by speculators engaging in some short-covering after such a drastic fall in oil," said Jonathan Chan, an energy analyst at Phillip Futures.

Oil markets have been under a dark cloud for over two years due to a persistent overhang caused by producers who are pumping at top speed to secure their market shares. Lower oil prices have resulted in net losses for many oil and gas companies. Even large cash-rich producers such as Saudi Arabia have complained about the shortfall in oil revenue.

To revive prices, members of the Organization of the Petroleum Exporting Countries in September reached a preliminary pact to cap the group's output to between 32.5 to 33 million barrels a day. The goal is to finalize and ratify the pact at the next OPEC meeting on November 30.

Market watchers have warned that even if an accord is finalized, implementation of production quotas would be flimsy at best because cartel leaders lack the authority to penalize members who don't comply. OPEC members have a spotty record of producing beyond their limits and are not always forthcoming about their output levels.

Several countries are already lobbying to be exempt from deal, arguing their production in recent years have been blunted by sanctions and militant attacks.

The rising skepticism has dragged on oil prices which have fallen over 8% this week so far. OPEC released a statement Thursday to pump up sentiment stating that it remains deeply optimistic about the possibility that the Algiers agreement will be complemented by precise, decisive action among all producers.

Another wild card is Russia which has been vague about its intent to join the production cut deal. Recent meetings between Russian oil officials and their OPEC counterparts have yielded no clear pledges. Russia's oil production touched a new post-Soviet high last month.

Some analysts say for the sake of protecting the group's credibility, the cartel will deliver an accord by month-end, but the content would be largely "watered down", said BMI Research.

"By watered down we mean either there will be a coordinated effort to 'freeze' production - other than the exempt Libya and Nigeria and Iran with a four million barrels a day cap," the firm said.

Another scenario is that the production target could be raised above 33 million barrels a day, to a level where core Gulf producers will only need to make small cuts, it said.

Nymex reformulated gasoline blendstock for December--the benchmark gasoline contract--fell 57 points to $1.4188 a gallon, while December diesel traded at $1.4596, 14 points higher.

ICE gasoil for November changed hands at $424.50 a metric ton, up $2.00 from Thursday's settlement.

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

(END) Dow Jones Newswires

November 03, 2016 23:45 ET (03:45 GMT)

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