Oil prices struggled for direction in European trade on Tuesday, as investors paused for breath following an impressive three-day rally which boosted prices by almost 10% amid indications major oil producers are reconsidering a collective production freeze in a bid to boost the market.
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The Organization of the Petroleum Exporting Countries’ President Mohammed bin Saleh al-Sada on August 8 said the cartel would hold an informal meeting late next month to discuss ways to stabilize the market.
“We are cooperating in consultations regarding the oil market with OPEC countries and producers from outside the organization, and are determined to continue dialogue to achieve market stability”, he added.
“The rumor mill around producer cooperation has resumed, spurred by recent comments from Saudi Arabia’s oil minister, allowing oil prices to gain”, said French bank BNP Paribas.
Both crude benchmarks have gained about 11 per cent over the past four sessions after Saudi Energy Minister Khalid al-Falih said the kingdom would work with others to stabilise the market.
In the 12 months to June, Venezuela’s crude output fell 9 percent to 2.36 million barrels per day (bpd).
“They are getting this OPEC freeze production in the face and they are being punished for their position”, said Bjarne Schieldrop, chief commodities analyst at SEB Markets. But they said it was unlikely that Saudi output will flood the market.
Technical analysts said oil could set 2016 highs in four to six weeks if Brent crosses $50 a barrel and U.S. crude $48.
Last week, the government’s Energy Information Administration said United States oil inventories expanded by 1.06 million barrels to 523.6 million barrels, the third straight week of growth, following a rise of 1.41 million barrels a week before.
Meanwhile U.S. West Texas Intermediate crude reached $46.16 per barrel, the highest since July 15, before easing to $45.98, settling at 17 percent above its $39.19 monthly low from August 3.
A weaker dollar also supported crude prices, as did the loss of more than 700,000 barrels per day (bpd) in Nigerian output to militant attacks and pipeline problems.
Prices surged 10% over just the past three trading days to above $45.50 a barrel on Monday. Last week on Monday, words got out that the OPEC members would be holding an informal meeting in September, on the sidelines of International Energy Agency’s (IEA) biennial meeting in Algeria.
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An attempt last spring to reach an agreement in Doha, Qatar to freeze output failed after Iran refused to join in, prompting the Saudis to give up on the plan.
