Also, US benchmark West Texas Intermediate (WTI) hit a near seven-week high of $48.71.
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An output cap would likely prove counter productive for Opec if it led to further price gains and an increase in supply from other producers, Goldman said. The statement by Minister of Energy and Industry and current OPEC President Saleh Al Sada that OPEC would discuss the possibilities of “oil production freeze” at the end of September, along with a weak USA dollar after flat United States retail data, pushed oil to the best week since April 2016.
“This is all courtesy of some very well-timed comments from the Saudi oil minister”, said John Kilduff, partner at Again Capital LLC, a NY hedge fund focused on energy.
Khobar-For long years, Saudi Arabia has been pioneering the crude oil market, given that it has been the biggest source of crude oil and biggest producer regarding quantity. Prices slipped US$1.72, or 3.4 per cent, to settle at US$49.16 on Monday.
“We’re expecting the availability of crude supply to improve, causing a counter-seasonal build in inventories in the second half”, said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.
The OPEC members aim to meet in Algiers on September 26-28.
A previous attempt by producers to freeze output collapsed in April amid tensions between Iran and Saudi Arabia and the refusal of some countries to join. Iran was restoring exports after sanctions over its nuclear program were lifted in January.
Morgan Stanley deemed an agreement on freezing production in the informal meeting on September of OPEC members and other oil producers would be “highly unlikely” and there were “too many headwinds and logistical challenges to a meaningful deal”. USA oil production is on the rise and so is potential OPEC production. Crude supplies dropped by 2.51 million barrels as of August 12, Energy Information Administration data show.
Dubai crude, which peaked at $48 per barrel on June 8, plunged to $38 on August 2. “When you post up a record short position of that size, the resulting unwinding tends to be rather dramatic”, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. Longs, or bets on rising prices, increased 0.1 percent, while net longs advanced 56 percent, the most since July 2010.
Investors increased their net long positions by 63,792 contracts to 354,915 in the week to August 16, the highest since mid-June.
The local demand on oil has regularly increased with the rise in domestic refineries; data showed that refineries’ consumption rose to an average of 2.49 million barrels/day by 17% compared to 2.14 million barrels/day in 2015. USA rigs increased by 10 and rigs in Canada decreased by five. The contract gained 9.1 percent this week, the most since March.
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A backlog of drilled but uncompleted wells, or DUCs, helps support the bearish case, said Ed Morse, head of commodities research at Citigroup Inc.in NY. “The stronger USA dollar is also helping pull it back lower”, writes Michael Hewson, chief market analyst at CMC Markets. Morgan Stanley notes that “new buyers have largely been absent” during the past few months, and the weak outlook doesn’t surprise us given that the reasons for weak economic growth around the world are largely structural.
