May 26, 2016 / 1:02 PM / a year ago

OPEC panel ahead of policy meeting sees improving oil market: sources

DUBAI/LONDON (Reuters) - OPEC officials were more positive about oil market conditions at talks in Vienna ahead of next week’s gathering of oil ministers, two sources said on Thursday, in a sign the exporter group is unlikely to change output policy on June 2.

A worker walks past a pump jack on an oil field owned by Bashneft company near the village of Nikolo-Berezovka, northwest from Ufa, Bashkortostan, Russia, in this January 28, 2015 file photo. REUTERS/Sergei Karpukhin/Files

Oil LCOc1 has recovered to $50 a barrel from a 12-year low of $27 in January even as Iran ramps up exports, and there are signs the Saudi-led strategy of OPEC not cutting supply orchestrated two years ago is working as inventories and higher-cost production outside the group decline.

OPEC’s national representatives - officials representing the 13 member countries - plus officials from OPEC’s Vienna secretariat - met to discuss the market. The two-day meeting, called the Economic Commission Board, ended on Wednesday.

“The market is performing well and stocks are going down,” said one source, who declined to be identified. “The expectation is for more decline in non-OPEC supply.”

Another source agreed that the feeling about the market at the meeting was generally better.

“The market is improving,” the second delegate said.

Last month, tensions between Saudi Arabia and arch-rival Iran ruined the first deal by OPEC and non-OPEC producers in 15 years to support oil prices by freezing output.

The issue of a production freeze was raised by Venezuela - which was among the early supporters of the initiative - during the ECB meeting, the first source said.

However, both sources said it was quickly dismissed as something to be decided on only by ministers.

The Organization of the Petroleum Exporting Countries has no supply limit, having scrapped its production target at its last meeting in December.

OPEC delegates and analysts expect the June 2 meeting to back a continuation of the no output ceiling policy.

Reporting by Alex Lawler and Rania El Gamal; editing by Jason Neely

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