With three weeks until their meeting in Algeria, oil traders are keeping tabs on Russian Federation and OPEC, hoping for signs they will find an agreement to address a global supply glut that has hammered prices for two years. November Brent crude on London’s ICE Futures exchange rose 72 cents, or 1.5%, to $47.98 a barrel.
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NYMEX crude for October delivery was down 8 cents at $44.75, after settling up 39 cents on Tuesday.
Oil rose on Wednesday to pare some of the previous day’s losses, partly thanks to a weaker USA dollar, but the limited likelihood of a near-term agreement among the world’s biggest exporters to rein in production kept gains in check. Generally, I think we’ll see lower prices going forward.
If production is frozen at early-2015 levels, it would effectively mean an output cut as most producers – including Saudi Arabia, Russia, Iraq and Iran – have steeply boosted production since then. That price level was also concurrently at a descending trend line extending back to the June price highs, as well as at the 61.8% Fibonacci retracement of the last major rally in August. “If OPEC freezes at these levels, these are record levels”, said Tariq Zahir, analyst at Tyche Capital Advisors.
“Iran is still talking about pre-sanction numbers and even with the production freeze, you’re still at such a high level”, Zahir said. “Certainly, some production was shut in because of the hurricane”, said Dominick Chirichella, senior partner at Energy Management Institute in NY.
There was a further draw in gasoline stocks of 2.3mn barrels following the draw of 1.6mn seen last week. In its monthly energy outlook report, the government agency forecast an average price of $41.92 a barrel for WTI this year, up from a previous estimate of $41.16.
Around the middle of 2017, drawdowns in global oil inventories are likely to begin, which will contribute to higher oil prices in the second quarter of next year, he said.
Trade was choppy as some traders eyed US oil inventory data due late Wednesday and Thursday morning for clearer direction.
Nationwide crude inventories plunged by 12.1 million barrels in the week to Sept 2, according to data released late Wednesday from the American Petroleum Institute.
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Oil prices LCOc1 soared nearly 5 percent ahead of a news conference by the two ministers, but pared gains to trade up 2 percent by 6.30 a.m. ET as the agreement yielded no immediate action.
