Oil futures rose on Tuesday supported by production suspensions in the US Gulf due to an expected tropical storm and speculation that producers meeting in Algeria next month will act to prop up prices.
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Brent crude futures traded at $49.73 per barrel yesterday, up 47 cents from the previous close. WTI for October delivery was down 21 cents to $46.14 a barrel on the New York Mercantile Exchange.
Iraq is the second-biggest member of OPEC, whose other major producers have signaled only qualified backing for an output accord.
Oil prices had rallied in August on hopes that Russian Federation and the Organization of the Oil Exporting Countries could agree to limit production when they meet in Algiers on September 26-28. If a production freeze is on the cards, it will be discussed in late September during an informal meeting of the OPEC states at the International Energy Forum in Algeria.
Limiting production will have a positive impact on the market, according to Saudi Arabia’s Energy Minister Khalid Al-Falih who still rules out cutting output.
On August 30, Iraq’s Prime Minister Haider ah-Abadi reportedly said Baghdad supports an output cap. A Bloomberg report said Iran plans to boost its output by 200,000 barrels a day by the end of the year.
But the prospect of a recovery in oil production from Libya happening any time soon was tempered after the head of the country’s National Oil Corp. said budgetary delays from the new government were undermining oil production. While the freeze deal has repeatedly been noted by oil market analysts as not all that significant in terms of its effect on the fundamentals of supply, it would have a substantial effect on market psychology, probably sparking a price rally even if in reality not much production will be moved offline.
“Today is just another economic story that’s fed the dollar’s strength and with the weekly build expected in USA crude, prices are getting a double whammy”, said Tariq Zahir, a trader in WTI timespreads at Tyche Capital Advisors in NY.
“The weaker dollar is providing support for oil prices today”, said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.
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Iranian Oil Minister Bijan Namdar Zanganeh said that the country expects to recover its market share – eroded during years of global sanctions – as a condition of co-operating with OPEC, according to an August 26 report by news service Shana. This week’s report showed an increase of 3.0 million barrels. The development relative to the preceding quarter was driven mainly by interbank sales, swaps and third party MDA transfer.
