Oil rises on news of deal to cut output

Oil surged the most in seven months Tuesday as OPEC members were said to be making a final diplomatic push toward securing a deal to cut output.

West Texas Intermediate crude for December delivery rose $2.49, or 5.8 per cent, to settle at $45.81 a barrel in New York, rebounding from an eight-week low.

“There are great hopes that OPEC will be able to come up with some sort of an agreement before the end of the month; it’s in their interest,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.

Qatar, Algeria and Venezuela are leading the push to overcome a divide between the group’s biggest producers to finalize a deal, according to a delegate familiar with the talks. The behind-the-scenes diplomacy comes after bilateral meetings over the weekend failed to resolve the rifts.

Oil has retreated for most of the past four weeks amid skepticism about the ability of the Organization of Petroleum Exporting Countries to implement a deal at its Nov. 30 meeting. The group is seeking to trim output for the first time in eight years as Iran boosts production and Iraq seeks an exemption because of its war with Islamic militants.

Brent for January settlement increased $2.52, or 5.7 per cent, to $46.95 a barrel in London on Tuesday.

“It’s not a surprise that there would be a rebound after the big drop,” said Kyle Cooper, director of research with IAF Advisors in Houston. “The size of the gain is surprising, though, especially given the lack of news. It’s important to remember that we’re still down more than $6 from last month’s highs.”

Saudi Arabia, Iraq and Iran are still at odds over how to share output cuts, according to an OPEC delegate, who asked not to be identified.