Oil extends gains on freeze hopes
OIL traded above US$44 a barrel in Asia yesterday, extending gains on hopes crude producers would agree to freeze output at a meeting next month, easing a stubborn global supply glut.
Saudi Arabian oil minister Khalid al-Falih’s comments last week that producers could discuss action to stabilise markets lifted market sentiment, helping prices rebound since closing below $40 a barrel and tumbling into a bear market earlier this month.
Any agreement to curb production would help rebalance the crude oil market, where output has been running ahead of demand.
US benchmark West Texas Intermediate for delivery in September was up 39 cents, or 0.88 percent, at $44.88 a barrel and Brent crude for October gained 36 cents, or 0.77pc, to $47.33.
Both contracts rose more than 6pc last week following the Saudi minister’s remarks.
“Oil is now close to an equilibrium price, and unless we get further developments, I would expect to see it trading around the $44 to $45 level for the balance of the week,” Michael McCarthy, a chief market strategist in Sydney at CMC Markets, told Bloomberg News.
Some analysts, however, have cautioned against putting too much hope on an output freeze, noting that previous talks earlier this year have resulted in disagreement.
“An agreement is still improbable,” research house Capital Economics said.
It said most oil-producing nations are already churning out crude barrels close to their capacity and any accord to limit output “is unlikely to accelerate market rebalancing by much”.
A monthly report from the Organization of the Petroleum Exporting Countries showed Saudi Arabian oil production was at nearly 10.5 million barrels per day in July, above peak levels.
CMC Markets’ Singapore-based analyst Margaret Yang said, “It remains to be seen how far this optimism [about an output freeze] could lead the crude rebound”.
OPEC’s informal meeting will take place on the sidelines of the International Energy Forum in Algeria from September 26 to 28, ahead of a planned meeting due at the end of November.