Oil prices rose Monday on renewed hope that major exporters might make progress on a deal to limit production and help whittle down the glut that has dragged down the market for more than two years.
The United Arab Emirates’ oil minister has posted support for a deal on social media and told reporters his country would support limits on production. That has some traders thinking a deal is slightly more likely than previously expected, analysts and brokers said.
“Odds of a symbolic catalyst emerging from (the) OPEC meeting have improved, from negligible to possible,” Guy Baber, analyst at Piper Jaffray Cos.’ Simmons & Co. International said in a note to clients Monday. “However…actually accelerating the physical oil market rebalancing remains unlikely.”
TRENDING NOW: California governor signs "Right to Rescue" bill on Monday
Light, sweet crude for November delivery settled up $1.45, or 3.3%, to $45.93 a barrel on the New York Mercantile Exchange, its fifth gain in six sessions. Brent, the global benchmark, gained $1.46, or 3.2%, to $47.35 a barrel, its largest daily gains since Sept. 8.
Prices also rose Monday after data provider Genscape said stockpiles at Cushing, Okla., shrank by 276,000 barrels from Sept. 16 to Sept. 23, according to a person who had reviewed the report. Federal data had already showed inventories fell sharply for the previous three-straight weeks, a much more important sign for oil than news coming from OPEC leaders, Brian Kessens, portfolio manager at Tortoise Capital Advisors said in his firm’s podcast.
But many brokers and analysts said traders are focused intensely on the Organization of the Petroleum Exporting Countries as leaders get ready to meet informally during an energy summit in Algiers. It is likely to keep up the volatile swings from last week, which ended with a 4% loss on Friday after Saudi Arabia said it didn’t expect OPEC and other prominent non-cartel producers, such as Russia, to clinch a deal on Wednesday.
Despite that setback, some believe OPEC is under increasing pressure to take action to support prices.
“Whichever way you slice it, OPEC has to cut production or else the market will not draw down the overhang accumulated over 2014 and 2015 even next year,” said consultancy Energy Aspects.
Since OPEC announced the meeting back in August, U.S. oil prices have seesawed between $43 and $49, largely driven by comments by different oil ministers and leaders.
