Just two weeks ago, the contract was trading below $40 a barrel.
Advertisement
OPEC member countries were expected to hold informal discussions on the possibility of agreeing to an oil output freeze at the venue.
But this is not the first time that hopes of a freeze has driven mini rallies in oil.
“Oil posted another.gain as speculation of potential production freezes by OPEC picked up pace”. Oil watchers warn that prices could be getting ahead of themselves.
Despite its more recent declarations, analysts maintained Opec was unlikely to act, because the current market outlook means it is effectively trapped.
Why symbolic? Because OPEC is already pumping more oil than it ever has before. That helped support the market today too. In fact, oil is being pumped at such a frenzied pace that there are reports of storage issues from all over.
“A freeze would only be a boost to market sentiment”, Mike Wittner, head of oil market research at Societe Generale, said in a report.
Saudi Arabia, now do not have any nuclear power reactors while Russia has built and has years of experiencing in constructing nuclear reactors in a statement by the Russian Energy Minister.
“Opec cooperation hopes should be treated with caution, as this is shaky ground to base a bull rally on”, the USA bank said.
However, market players remained skeptical that the meeting would result in any concrete actions.
“Overall, since August 8th there s been an endless supply of headlines by OPEC talking about this late September meeting”, said Yawger, who noted that the remarks came during a period of record short-selling. In other words, he may not be signaling a big shift. Major producers like Russian Federation and the Saudi Kingdom are ramping up production.
Brent crude oil futures rose to a high for the month of $47.67 a barrel on Monday before dipping back to $47.17 per barrel at 1230 GMT, up 20 cents from their last settlement, and more than 11 percent above the last close in July.
Iran hasn’t yet recovered pre-sanctions production levels, while Nigeria and Libya are also operating at reduced output, Giovanni Staunovo, an analyst at UBS Group AG, said by e-mail.
Despite recent gains, indications of an ongoing recovery in USA drilling activity combined with elevated stocks of fuel products around the world is expected to keep prices under pressure in the near-term.
Advertisement
“Oil is now close to an equilibrium price, and unless we get further developments, I would expect to see it trading around the United States dollars 44 to USD 45 level for the balance of the week”, Michael McCarthy, a chief market strategist in Sydney at CMC Markets, told Bloomberg News.
