Oil prices fell to their lowest level this year on Thursday as traders waited for OPEC to thrash out details of an output cut and the market anticipated another rise in already hefty U.S. crude inventories.
OPEC ministers have agreed oil markets are oversupplied by around one million barrels per day, but have yet to decide on whether to make a reduction from a notional 28 million-bpd production ceiling or from actual supply of nearly 27.5 million bpd in September.
They are also divided over whether to hold an emergency meeting to formalize what would be the Organization of the Petroleum Exporting Countries' first output cut since 2004.
"Speed is of the essence more than anything else -- dithering to date has cost them credibility," said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia. "Actual output will of course have to fall to have an impact on actual prices."
Some analysts say prices could fall further with or without an output cut, as lower OPEC production would increase spare capacity, meaning OPEC were better able to cope with any unexpected supply disruption.
"Low spare capacity has been a big driver of prices this year," said Eoin O'Callaghan of BNP Paribas.
He said there were also concerns about the health of the U.S. economy, which could lead to reduced demand.
Already brimming inventories were expected to continue to build.
U.S. government data to be released at 1430 GMT on Thursday, a day later than usual because of a public holiday, will show U.S. crude stocks have risen by 800,000 barrels in the week ending October 6, according to a Reuters survey of analysts.
Distillate inventories, including heating oil, which are already at their highest level since 1999, were expected to be another 100,000 barrels higher.
Distillate demand has been sapped by warm weather. U.S. government forecasters said this week they expected warmer-than-average temperatures across much of the world's top oil consumer for the winter season.
China's crude oil consumption, however, is robust, after customs data on Thursday showed its crude imports in September jumped 24 percent from a year earlier to a record high of 13.46 million tons, or 3.28 million bpd.
China's consumption has been boosted in part by the fact it has started building up emergency stockpiles.
