Buoyed by rising optimism that OPEC will agree later this month to cut production to reduce a supply glut, oil prices rose around 2 percent on Tuesday and they bounced back from multi-month lows.
After hitting a three-month low of $43.57 on Monday, North Sea Brent crude oil LCOc1 was up 75 cents a barrel at $45.18 by 0915 GMT.
Before easing to $44.30 U.S. light crude oil CLc1 reached a high of $44.43 and rose $1.11 a barrel, or 2.5 percent.
With the aim of getting into a consensus and an agreement to put a limit to the oil output from its member countries, oil producers in the Organization of the Petroleum Exporting Countries are due to meet on Nov. 30. However officials of the oil cartel have said that negotiations on the details of a plan have proved to be difficult even though an outline deal was reached in September.
Several members of OPEC wish to increase production even as the organization is a diverse grouping, politically and economically.
Algeria’s state news agency APS said on Sunday that Saudi Arabia’s energy minister has said it is imperative OPEC reach a consensus on a deal to curb production.
“Reports of a diplomatic push by OPEC to strike a deal are supporting the markets. The rally could last a little while but the underlying fundamental picture is still bearish,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
There have been recent media reports that key producers of OPEC including Iran and Iraq were thinking about restraining production and market sentiment has been buoyed by such reports, IG Group market strategist Jingyi Pan said.
“News of Qatar, Algeria and Venezuela leading the push for the OPEC deal were music to the ears for oil traders, boosting crude oil prices,” Jingyi Pan said.
There are also expectations that U.S. shale oil production will fall to its lowest since April 2014 at 4.5 million barrels per day (bpd) in December and this expectation has also helped in the prices getting buoyed.
After a month of falls, oil markets were due to an upward correction, technical analysts said.
Crude prices were supported by short-covering, Philips Futures investment analyst Jonathan Chan in Singapore said.
“The current active contract (for U.S. crude) is expiring. The last trading day is next Monday, so some oil traders are already starting to close out their positions to roll over,” Chan said.
But rising Libyan oil production could put a serious cap on the gains that the international oil price has made so far.
Leaving port on Monday was a tanker that is carrying the first freshly produced cargo of Libyan crude oil that is to be exported since the Ras Lanuf terminal reopened in September. Touching almost 600,000 bpd in recent weeks, Libya’s oil production has almost doubled.
(Adapted from Reuters)
Categories: Economy & Finance