The moves, however, were largely overshadowed by growing expectations the Organization of the Petroleum Exporting Countries will agree on capping output at an informal meeting in Algeria next month, helping crude CLV6, -0.82% last week log its best week in more than five months.
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Goldman Sachs forecast $45-$50 for a barrel of oil through summer 2017, maintaining its view of weak fundamentals in the near term. In between, there has been an OPEC meeting in June and talk of a meeting in Algeria next month to freeze production and crude has traded over $51 and under $40.
A two-year long selloff in oil has severely hurt the economies of Venezuela, Iraq and Nigeria and they are more anxious to boost crude prices than OPEC producers such as Saudi Arabia and Iran, that are more keen in protecting market share.
The price of a barrel of oil rose more than 1 percent on Tuesday after Reuters reported that Iran is open to an agreement with OPEC to cap its oil output to help boost the price of the commodity higher. Supply will remain the driver for oil prices in coming weeks, with no evidence demand growth is weakening, the bank said. Prices had suffered a drop of 3.5% on Monday, following seven straight sessions of gains that lifted WTI prices into bull market territory.
Crude oil is spiking Tuesday morning on fresh rumors of coordinated action from OPEC.
U.S. benchmark West Texas Intermediate for October delivery gave up 28 cents at $47.13 a barrel.
“We believe neither [OPEC freeze or dollar slump] will be sufficient to support prices much further”, the Goldman strategists, led by Damian Courvalin and Jeffrey Currie, said in note dated Monday.
Goldman says at least 100,000 barrels a day in total from those countries will be unleashed to the market in the second half of 2016, dealing a blow to a sector that’s already buckling under from high production and oversupply globally.
Brent for October settlement climbed 48 cents, or 1 percent, to $49.64 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.78 premium to WTI. With the Energy Information Administration reporting USA exports hit a record 662,000 barrels per day in May 2016, perhaps the US should apply for number 15. With so numerous participants in the Algeria meeting pushing output to high levels, the freeze will mean very little.
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China’s oil demand may be cut by 250,000 barrels a day in the third quarter as the country limits pollution from factories before a Group of 20 summit in early September, according to consulting firm Energy Aspects.
