Oil stages its strongest week in five months
Upcoming OPEC talks, inventory drop cited
Oil capped its strongest weekly increase in five months after entering a bull market as investors weighed speculation that OPEC talks next month could lead to an output freeze, and U.S. inventories dropped.
Futures rose 0.6 percent in New York. While OPEC is unlikely to reach a deal to freeze production, its plans to hold informal talks in Algiers next month “were the spark” behind oil’s rally, according to Morgan Stanley. U.S. crude inventories dropped the most in five weeks through Aug. 12, while fuel stockpiles slid a third week, Energy Information Administration data showed Wednesday.
Oil has climbed more than 20 percent since it dipped below $40 a barrel earlier in the month, meeting the common definition of a bull market. Russian Energy Minister Alexander Novak said that the nation was open to discussing a freeze after his Saudi counterpart Khalid Al-Falih said that informal talks in September may lead to action to stabilize the market.
While money managers increased wagers on rising oil prices by the most since January during the week ended Aug. 9, bearish bets on crude remained at record-high levels, according to the Commodity Futures Trading Commission.
“It’s kind of a perfect storm that has rallied this market, but on the other hand it has nothing to do with fundamentals,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “It’s really a short-covering rally that’s been fueled by OPEC rumors.”
West Texas Intermediate for September delivery advanced 30 cents to settle at $48.52 a barrel on the New York Mercantile Exchange. The contract gained 9.1 percent this week, the most since March.
U.S. oil drillers added 10 rigs this week, extending the biggest and longest increases since April 2014, Baker Hughes Inc. data show.
An agreement to freeze output is within reach as Saudi Arabia, Iran and non-OPEC member Russia are producing at, or close to, maximum capacity, Chakib Khelil, former OPEC president and Algerian energy minister, said in a Bloomberg Television interview on Aug. 17.
In other oil-market news, a glut of crude oil stored in ships on the North Sea is starting to dissipate, with demand increasing as traders take advantage of remaining discounts before maintenance begins at Britain’s largest oil field.
Also, U.S. crude stockpiles dropped by 2.5 million barrels last week to 521.1 million, according to data from the EIA.