Oil steadied below $45 on Tuesday, bolstered by expectations that OPEC will agree its largest supply cut ever, after dropping 4% the previous day on persistent worries of a deepening economic slump.
A weaker dollar, which tends to support commodities, also lent a hand.
Oil dropped to a four-year low of $40.50 on December 5 - more than a $100 slide from its July all-time high - as global economic turmoil depresses demand in large consumer nations such as the United States and Japan.
On Monday, China, long a major engine for rising crude prices, joined ranks with those top consumers. Its apparent oil demand fell last month for the first time in nearly three years.
“OPEC could achieve limited success on Wednesday. They might do enough to stop prices from sliding further,” said UBS economist Jan Stuart.
In an attempt to build a floor under prices, OPEC ministers, who meet on Wednesday in Algeria, are calling for the largest output cuts ever to combat shrinking demand and bulging inventories.
For many in the Organization of the Petroleum Exporting Countries, up to 2 million barrels per day (bpd) must be removed to keep up with a slump in consumption that has knocked two-thirds off prices since a July record above $147.
That would come on top of a combined two million barrels daily that OPEC has already slashed at two previous meetings.
In another sign that Russia is willing to clinch a deal to protect prices, the world's top non-OPEC producer is sending its highest ranking delegation ever to the meeting -- including heads of its five top oil companies.
The market will also be watching the US Federal Reserve, which is expected to drop interest rates close to zero on Tuesday. But anticipated remarks on unconventional methods to dispel a year-old recession are what will really matter.
Looking ahead to Wednesday, US crude oil stocks probably rose by 300,000 barrels as a contango price structure prompted refiners to fill up storage tanks, a preliminary Reuters poll of analysts showed ahead of the data's release. (Reuters)