Oil price heads for $50 after Russia stokes output-deal rumour
Energy minister Alexander Novak pumps up hopes ahead of production talks next month
Oil has enjoyed its best three-session gain for four months and the benchmark that sets prices in the North Sea is moving towards $50 a barrel as rumours grow of a deal to curb output.
Brent crude was up 0.5 per cent this morning in London to $48.60 a barrel, the highest it has been since the first week of July.
Its US counterpart, West Texas Intermediate, rose 0.6 per cent to more than $46 a barrel. It has risen ten per cent in three sessions, its best run since April.
The latest move was driven by Russia stoking the rumour mill over a meeting of producer nations in Algeria next month, which the market hopes will lead to a formal production cap to support prices.
“Russian Energy Minister Alexander Novak said his country is consulting with Saudi Arabia and other producers to achieve oil-market stability,” reports theWall Street Journal.
Last week, the Saudi energy minister, Khalid al-Falih, said members of the Opec cartel and other producers would “discuss… any action that may be required to stabilize prices”, says Reuters.
With the two largest oil producers in the world both apparently singing from the same sheet, optimism is building that after two years of letting the market run wild, action will now be taken.
However, we’ve been here before. Russia and Saudi Arabia’s positive notes ahead of a meeting in April saw prices jump, but in the end, there was no deal and oil slumped back.
“There appears little incentive for producers to back away from jawboning,” Matt Smith, the director of commodity research at ClipperData, said.
“It seems prudent to point out the contrast betwixt actions versus words.”
Some, however, think the rally was overdue. Despite rises in raw crude and petrol stocks in recent weeks, the market has come more into balance just as bets on price falls hit a record high.
“The market may have set itself up for a large crude price rally to come as funds will inevitably look to exit [bearish] positions,” analysts at Raymond James said.
Source: The Week
