Oil futures rallied on Monday, after Russian President Vladimir Putin said the country would freeze its oil output, and as fresh discussions ahead of this month’s meeting of the Organization of the Petroleum Exporting Countries took place.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in December CLZ6, 1.01% traded at $46.14 a barrel, up 55 cents, or 1.2%, in the Globex electronic session. January Brent crude LCOF7, 1.11% on London’s ICE Futures exchange rose 48 cents, or 1%, to $47.34 a barrel.
“Oil is already more than 1% higher on the day, helped by Vladimir Putin’s belief that an output deal will be reached later this month,” Craig Erlam, senior market analyst at OANDA, said in a note to clients on Monday.
Putin said he sees a “high probability” that an agreement to curb oil production will be reached at the Nov. 30 meeting in Vienna.
“We will do everything that our partners from OPEC are expecting. To freeze crude production is not an issue for us,” Putin said Sunday at a news conference in Lima after an Asia-Pacific Economic Cooperation summit, according to Reuters.
Those comments were in addition to a renewed push by members of OPEC to resolve differences ahead of the end-month meeting. Iraq’s oil minister Jabbar al-Luaibi said late Sunday the country plans to offer three new proposals this week aimed at bolstering the unity of the group.
The country’s oil minister declined to give specifics about the proposals, but Iraq’s contribution to a proposed supply cut by OPEC has been a key stumbling block toward reaching a deal. Iraq has been ramping up oil production for more than two years and has said it desperately needs oil revenue in order to fund its war against Islamic State.
Market sentiment was also bolstered by comments from Iran’s oil minister Bijan Zangeneh, who on Saturday said OPEC is “highly likely” to reach a final agreement to curb oil production later this month.
“Traders will be looking at this rhetoric and saying, ‘well it seems like it’s almost a forgone conclusion that they’ll come up with something,’” said Stuart Ive, private client manager at OM Financial. “There’s too much at stake for them now, so they need to deliver.”
While oil prices have retreated sharply from highs above $50 a barrel reached in October, they have rebounded in recent sessions amidst diplomatic maneuvers by OPEC members. The cartel is looking to cut production to between 32.5 million and 33 million barrels a day, down from record levels of 33.83 million barrels a day of output in October.
Still, differences within the group remain wide, and OPEC has failed repeatedly to deliver on production cuts since oil prices began to tumble two years ago. OPEC’s deadlock and elevated production among non-OPEC members like the U.S. have contributed to low prices.
Looking ahead, the oil market is still coming to grips with a Donald Trump presidency, which is widely expected to bring looser regulations, and potentially higher output of U.S. oil and gas.
“U.S. elections have further muddled the decision-making process as Donald Trump has made strong statements about Iranian sanctions and banning imports of Saudi crude,” analysts at Barclays wrote in a note to clients. They expect OPEC to agree to a “face-saving statement” at its Nov. 30 meeting, which would “show case agreement, provide flexibility and not veer too far from what countries had planned initially for” the first half of 2017.
Nymex reformulated gasoline blendstock for December RBZ6, 0.68% — the benchmark gasoline contract — rose 0.9% to $1.3507 a gallon, while December diesel traded at $1.4689, 112 points higher.
ICE gasoil for December changed hands at $430 a metric ton, up $6 from Friday’s settlement.
Source: MarketWatch
