Brent traded at 50.46 per barrel, a 1.2% gain, by 10:56am ET (2:56pm GMT) after touching its highest since 4 July at $50.50.
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Brent, against which half of the world’s oil is priced, rose by $0.84 to $50.69 per barrel as of 7:58pm Nigerian time.
There appear to be three fundamental reasons for the rally. Though Saudi Arabia is a member of OPEC, Russia is not, but it is expected to participate at the upcoming informal meeting of the cartel in Algeria next month. Sellers Reduce Bets Against U.S. DollarSeptember U.S. Dollar Index futures posted a small gain on Friday.
Others, including OPEC member Nigeria, do not think there will be a deal.
But freezing production at current levels might not help bolster prices, many analysts say, particularly since Saudi Arabia signalled that it could boost crude supplies in August to a new record, even as it prepares to discuss output levels with other producers. The country had prevented previous deals because it didn’t want to halt its production ramp up and Saudi Arabia insisted it must be part of any agreement.
The market may be getting over-confident that a deal will be struck.
The market is betting on a change in direction from OPEC – well, a pause or “freeze” at least – when the group of major oil producer meet in September. According to EIA, US crude stockpiles slide last week by 2.5 million and Gasoline stockpiles also fell to 2.7 million barrels.
This means that it’s going to take longer for the global supply glut to fall.
Crude-oil prices for 2017 are rising, and companies may take advantage of the recent rally to lock in prices for future production, said energy-consulting firm Petromatrix in a note.
In addition to optimism toward a possible production freeze, a weekly report on an unexpected fall of 2.51 million barrels in oil inventories in the USA market released by the Energy Information Administration also gave an additional boost to crude oil prices, the sources said.
“Oil prices climbed higher because of the US crude stocks downtrend and positive market sentiment, led by OPEC talks”.
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The weekly chart for Brent is potentially the most important, given that it portrays a picture of a market attempting to break out of a multiyear downtrend. We could have a short retreat if the rate will fail to climb above the today’s high, we could see a retest of the 50% retracement level and the second warning line before the rate will climb towards new highs.
