Opec Secretary General, Abdullah al-Badri, said on Tuesday current low oil prices would not continue and may rise in a few months or a year.
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Brent crude, the global benchmark, traded up 40c, or 1%, at $38.32 a barrel at 9.13am GMT, levels last seen in late 2008.
Again Capital partner John Kilduff said the market might have found a bottom.
WTI for January delivery climbed 78 cents, or 2.2 percent, to $36.40 a barrel at 12:24 p.m. on the New York Mercantile Exchange. The contract settled down 1 cent at $37.92 a barrel on Monday.
If Brent is to fall below that price, it would be the lowest price its seen since the middle of 2004 a year when crude was starting to surge from the single digits it touched during the financial crisis of 1998 and when there was talk that the commodity super cycle was just starting. United States crude was trading at $36.49, up 18c.
Morgan Stanley said that “continued demand growth and less supply mean that the oversupply in oil markets could disappear by year-end” of 2016.
This seasonal weakness is compounding a structural oversupply as 0.5 million to 2 million barrels of crude per day (bpd) is produced in excess of demand.
On the supply side, the Organization of the Petroleum Exporting Countries (OPEC) is expected to maintain near record-high output next year, especially if Iran’s sanctions-hit sales fully resume. The OPEC member’s oil production has shrunk to about 375,000 barrels a day from 1.6 million a day before the 2011 rebellion that toppled Muammar Qaddafi.
Traders said that the low prices heading towards the end of the year were a combination of structural oversupply and seasonal price weakness. The group at its last meeting failed to agree on output targets to reduce oil supply that has cut prices by more than 60 percent since 2014. A number of its own member countries, including Venezuela, are struggling immensely in this low price environment and conditions will only worsen should oil prices fall lower.
The U.S. benchmark, West Texas Intermediate, settled in $35 territory for the first time since February 2009, paring earlier losses after data showed that U.S. drillers cut the number of oil rigs to the lowest since April 2010. “Russia has also greatly increased production, and the possibility that sanctions will be lifted on Iran in 2016 could flood the market with even more supply”.
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The U.S. Congress is nearing a deal on the biggest shift in the nation’s oil policy in more than a generation by allowing the world’s largest oil and gas producer to sell crude overseas.
