By Aaron Sheldrick
TOKYO (Reuters) - Oil prices fell in muted trading ahead of OPEC talks in Vienna later on Thursday, trimming some of the sharp gains made the previous session on both the possibility of producers agreeing further output cuts and a sharp drop in U.S. crude inventories.
Brent crude futures dipped 10 cents, or 0.2%, to $62.90 a barrel by 0547 GMT. Brent surged 3.6% on Wednesday.
West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.4%, to $58.21 a barrel. They settled up 4.2% on Wednesday.
Prices are now back roughly to the levels of a week ago, before they plunged on a lack of progress on resolving a 17-month-old Sino-U.S. trade war that has hit global growth and demand for oil.
U.S. President Donald Trump on Wednesday described trade talks with China as going "very well," a day after saying it could take until after next year's presidential election to complete an agreement.
Investor attention has switched to meetings of the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, and the possibility of more production cuts.
The so-called OPEC+ group has been curbing output since 2017 to counter surging production from the United States, which is now the world's biggest oil producer. OPEC+ has been withholding about 1.2 million barrels per day of production. OPEC is aiming to push for deeper reductions in output but needs the agreement of Russia and other oil producers to avoid a supply glut next year, after demand growth slowed in 2019, while many analysts are sceptical of further cuts.
"Saudi Arabia's concerns about its loss of market share and little appetite for increased cuts in Russia, will win the day," said Franziska Palmas, assistant economist at Capital Economics. "Accordingly, we expect OPEC+ to only roll over its current production quota at this week’s meeting."
OPEC members will meet among themselves on Thursday and be joined on Friday by Russia and the other producers.
Oil prices surged on Wednesday after U.S. crude inventories fell by much more than expected, according to official figures.
Crude stockpiles fell by 4.9 million barrels last week, the Energy Information Administration said on Wednesday, compared with expectations in a Reuters poll of a 1.9 million-barrel decline.
Still, gasoline and distillate stocks surged by a similar amount as crude's decline, with refinery runs increasing ahead of winter stockpiling.
Gasoline stocks were up by 3.4 million barrel, double expectations in the Reuters poll. Distillate inventories jumped by nearly three times expectations, gaining 3.1 million barrels.