The oil market was contending with exactly how much output will change as the OPEC, which holds its biannual meeting on Friday, is widely expected to agree to pump more, possibly supported by some other producers outside OPEC, including Russia.
“I think it’s going to be an increase, but it’s just a matter of what’s the magnitude,” said Dominick Chirichella, director at EMI DTN.
Brent crude dropped $1.12 to $73.62 a barrel by 1:57 p.m. EDT (1757 GMT) after earlier hitting a session low of $72.94.
U.S. West Texas Intermediate crude for August delivery, the new front month, rose 30 cents to $66.01, but was lower than the July contract's expiry on Wednesday at $66.22.
WTI briefly turned positive earlier in the session after energy information provider Genscape said crude inventories at the key Cushing, Oklahoma hub were expected to have dropped by 2.3 million barrels in the week since Tuesday, traders said, alleviating some concerns that surging U.S. production would outstrip demand.
Brent reached a 3-1/2-year high above $80 a barrel last month but has fallen steadily in recent weeks as Saudi Arabia, de facto leader of OPEC, has signalled it intends to raise production to stabilise prices.
Iran had been expected to oppose any rise in crude output, but it has now signalled it may support a small increase.
"We need to release supply to the market," Saudi Arabian Energy Minister Khalid al-Falih told reporters in Vienna. "How much oil do we need? ... Around 1 million (barrels per day) probably."
Falih said the oil market had now rebalanced and his aim was to prevent a shortage of crude in future that could squeeze the market.
OPEC member Ecuador's oil minister Carlos Perez said he expects an increase of about 600,000 bpd.
Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told Reuters Global Oil Forum he expected OPEC and Russia to agree a compromise that would see a small increase in global oil production.
"It would seem that an aggregate increase in production for OPEC+ of between 500,000 bpd and 1 million bpd is the range that is being considered," Tchilinguirian said.
OPEC, together with other key producers including Russia, started withholding output in 2017 to prop up prices, but a tightening market has led to calls by consumers for more supplies.
(Additional reporting by Henning Gloystein in Singapore and Christopher Johnson in London; Editing by Marguerita Choy and David Evans)
By Andres Guerra Luz