Oil ex­tends gains on freeze hopes

The Myanmar Times - - International Business -

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.

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