Crude prices set for volatile sessions ahead of Algeria meeting
World oil prices have recorded a growth amid output suspensions in the U.S. Gulf due to expected weather deterioration and speculation that the upcoming Algeria meeting will be a turning point for reaching a supply and demand balance in the "black gold" market.
Brent crude futures were 47 cents up from the previous close at $49.73 on August 30. U.S. West Texas Intermediate (WTI) crude was up 45 cents at $47.43 per barrel, CNBC reported.
Oil and gas operators in the U.S. Gulf of Mexico have shut output equal to 168,334 barrels per day (bpd) of oil and 190 million cubic feet per day of natural gas as a precaution against a tropical storm, the U.S. Bureau of Safety and Environmental Enforcement said on Monday.
The rise was also triggered by speculation that producers’ meeting in Algeria next month will support the prices. "Prices are still finding support from the expectations of an agreement on production caps being reached at the late-September meeting," Commerzbank said in a note, Reuters reported.
Nevertheless, most of analysts say that disagreements within the Organization of the Petroleum Exporting Countries (OPEC), and especially its key members -- Saudi Arabia and Iran, undermine expectations of any positive impact on global output from the upcoming talks.
“There’s a lot of price uncertainty,” Robert Boslego, managing director of Boslego Risk Services in Santa Barbara, Calif, told the WST. “Oil inventories keep reaching new highs,” he said, adding that the big question whether OPEC members will intervene “if prices go back down to $40.”
Moreover, pessimistic expectations on the possible output freeze were even strengthened after Iraq’s new Oil Minister Jabbar Al-Luaibi asked the multinational corporations extracting oil on Iraqi lands to increase output.
Oil exports from Iraq's (OPEC’s fourth oil producer for the volume of its proven crude oil reserves) southern ports have averaged 3.205 million barrels per day (bpd) in August, exceeding the average level seen in July, according to two officials from the state-run South Oil Company. Exports in July averaged 3.202 million bpd.
Meanwhile, Baghdad has not yet provided any information on whether Al-Luaibi will attend September meeting of OPEC and nonOPEC states or not.
The situation on the market was also influenced by a statement of the Iranian side. Tehran announced that it would only cooperate in the upcoming talks if fellow exporters recognize Iran’s right to fully regain market share.
Nevertheless, analysts say that the average price of Brent grade will stand at $61 per barrel mainly depending on the USD rates and the U.S. Federal Reserve System (FRS) decision on interest rates.
Barclays said that it saw "incoming oil market data (both demand and supply) as a source for price strength in the fourth quarter of 2016.
An increase in U.S. interest rates is expected to lift the dollar and positively influence oil prices as strong greenback makes fuel purchases more expensive for traders who conduct business in other currencies. Some economists say that the next hike could even come next month.
The central bank opted to keep rates between 0.25% and 0.5% for the fifth consecutive meeting in July, while the last time raise was fixed in December 2015, following a gap of a nearly a decade.