“I would not be surprised to see some short-covering in the second half of this week just ahead of the informal OPEC meeting”, said Tamas Varga, lead oil analyst at London brokerage PVM Oil Associates.
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On the economic data front, German producer prices fell back into deflationary territory in August after rising for the past 4 months.
Saudi Arabia’s domestic crude inventories totalled 281.463 million barrels in July, down from 289.445 million in June, data provided by the Joint Organisations Data Initiative (JODI) showed.
Several producers have called for an output freeze to rein in a supply glut that triggered a price collapse in the last two years, hitting their income.
“A big part of the rally (on Monday) was the hope that a deal could be getting closer with agreement at the Algiers meeting potentially leading to another meeting”, said Greg McKenna, chief market strategist at Australia-based retail forex broker AxiTrader.
In Libya, turmoil helped push up oil prices Monday. “There is one guy on the whole committee arguing for a freeze and there’s the Iranians have a different interest, the Russians have a different interest”. Part of Colonial Pipeline Co.’s main gasoline line, capable of carrying 1.3 million barrels a day from the Gulf Coast to the eastern US, was shut after a leak, reducing deliveries to New York Harbor, the delivery point for Nymex contracts. He added that an extraordinary meeting of the cartel could happen if the Algeria conference produced a consensus, as Algeria meeting is for consultations and not decision-making.
Meanwhile, OPEC Secretary-General Mohammed Barkindo said he is confident the cartel will reach an informal supply agreement, mentioning that now, some 3 billion barrels of crude oil remain unrealized.
Last week was a bad week for crude oil prices, and this week does not seem to be any better.
Oil prices fell Tuesday as hopes for any deal between the Organization of the Petroleum Exporting Countries and Russian Federation to freeze production continued to fade. “That is already a positive”, Bouterfa said. US oil prices have stayed above $40 for over five months since early April.
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Hassan Rouhani, president of Iran, who also attended the summit, reiterated an earlier comment that Tehran will support any stabilization effort. OPEC Secretary-General Mohammed Barkindo said he’s confident the group will reach an informal supply agreement in Algiers next week, Italian newspaper La Repubblica reported.
