DOHA: Oil prices jumped more than 3 percent on Monday amid renewed speculation that OPEC would try to restrain output, easing oversupply worries that had sent the market to three-month lows last week.
U.S. West Texas Intermediate (WTI) crude futures settled 2.92 percent higher, or $1.22, at $43.02 a barrel. International Brent crude futures were trading at $45.33 a barrel, up $1.06. or 2.39 percent.
The rise came on the back of a Wall Street Journal report late last week that OPEC countries such as Venezuela, Ecuador and Kuwait want to take another stab at cooperation between the 14-nation Organization of the Petroleum Exporting Countries and non-members such as Russia.
The last such initiative failed in April after Saudi Arabia backed out of talks in Doha, Qatar, citing Iran’s refusal to join in a so-called production freeze.
Qatar’s energy minister and OPEC president Mohammad bin Saleh al-Sada said in a statement the producer group was in “constant deliberations with all member states on ways and means to help restore stability and order to the oil market.”
The statement added that an informal meeting of OPEC member countries was scheduled to take place on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria from Sept. 26-28. Russia, the world’s biggest oil producer, poured cold water on Monday on a new production freeze plan.
“The position of Russia is that the prerequisites for this have not yet come to pass, considering that prices are still at a more or less normal level,” Energy Minister Alexander Novak, said, adding that he remained open to negotiations.
Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates, said. “OPEC appears to be concerned about the apparent bottoming in U.S. oil rig counts that have been lifted to highest levels since March,” said
“Add in the possibility that global oil demand growth may be slowing and it would appear that OPEC calls for restraint would be inevitable.”
A glut of crude and refined products loomed over the market. The U.S. oil rig count rose last week for a sixth week in a row. In China, fuel exports rose over 50 percent from a year earlier to a monthly record 4.57 million tons, adding to a global glut.
The market, however, shrugged off a Genscape report of a build of more than 307,000 barrels at the Cushing, Oklahoma delivery hub for U.S. crude futures in the week to Aug. 5, cited by traders. A Cushing inventory rise of over 200,000 barrels is typically bearish for crude.
Hedge funds cut their bullish exposure to Brent to the smallest since January while paring positive bets on WTI to the least since February. The combination of factors led analysts to warn that the world had not yet dealt with the overhang of physical oil, which could drag prices lower again before any sustained recovery.
“The proper signals are not yet being sent to fix the product market,” Morgan Stanley said in a note, noting that refined products also needed to draw down a large excess.
“In other words, physical oil markets likely need to get worse before they get better.”
