The market is looking for progress on an oil deal this week
Crude-oil futures rose in early Asia trade Monday on bargain hunting and renewed hope that major producers might make progress on a deal to limit production and help whittle down the glut that has kept prices in the doldrums for more than two years.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in November CLX6, +0.65% traded at $ 44.78 a barrel, up $ 0.67, or 0.3%, in the Globex electronic session. November Brent crude LCOX6, +0.74% on London’s ICE Futures exchange rose $ 0.31, or 0.7%, to $ 46.23 a barrel.
Oil prices sank 4% on Friday in the New York session after Saudi Arabia said it didn’t expect the Organization of the Petroleum Exporting Countries and other prominent non-cartel producers, such as Russia, to clinch a deal on Wednesday when they meet on the sidelines of an energy conference in Algeria.
However, comments from various OPEC members over the weekend suggest an agreement could still be reached, said ANZ.
“Once bitten, twice shy. We have been burned before and we are not seeing any solid evidence that this time they will agree to a deal.” Ben Le Brun, OptionsXpress
Algerian oil minister Noureddine Bouterfa, a staunch advocate of a production limit, said there was still a chance a deal could be sealed this week, but acknowledged that the meeting may produce only “the elements of an agreement.”
“We can’t come out empty-handed,” Bouterfa said, warning that oil prices could drop back into the $ 30s if OPEC fails to reach a consensus.
Since OPEC announced the meeting back in August, Brent oil prices have seesawed between $ 45 and $ 50, largely driven by comments by different oil ministers and leaders.
For more than two years, global oil markets have been beleaguered by oversupply that has kept prices below $ 100. As major producers continue to prioritize market share over prices, many analysts don’t expect to see a deal this week. OPEC has already failed at several attempts to impose some sort of production cap this past year.
“Once bitten, twice shy. We have been burned before and we are not seeing any solid evidence that this time they will agree to a deal,” said Ben Le Brun, a market analyst at the Australia-based OptionsXpress. “We are all approaching this meeting with caution.”
OPEC’s own monthly report in August noted non-OPEC supply will likely gain by 350,000 barrel a day in 2017, an upward revision from the previous estimate due to the stronger-than-expected resilience from the U.S. shale producers. According to industry group Baker Hughes, the number of rigs drilling for oil in the U.S. rose by two to 418 in the week ended Sept. 16.
The oil-rig count has generally been rising since the beginning of the summer, as many oil producers believe drilling in some parts of the U.S. can be profitable even with oil prices in the range of $ 40 to $ 50 a barrel over the past six months.
Another risk is the recent resumption of oil production and exports in Nigeria and Libya, which should lead supplies higher, said Barnabas Gan, an economist at OCBC.
“Even if a production freeze agreement were signed, this would change very little from a fundamental perspective, given that most OPEC members are already pumping close to their peak capacity,” said BMI Research.
Nymex reformulated gasoline blendstock for October RBZ6, +0.60% — the benchmark gasoline contract — rose 89.99999 points to $ 1.3859 a gallon, while October diesel traded at $ 1.4179, 106 points higher.
ICE gasoil for October changed hands at $ 416.25 a metric ton, down $ 9.25 from Friday’s settlement.
— Benoit Faucon and Summer Said contributed to this article.