Oil prices moved a solid leg higher on Thursday as investors and traders wait for the outcome of the Organization of the Petroleum Exporting Countries meeting later today, where discussion on a collective output ceiling could be revived.
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Brent crude – an worldwide benchmark – was up 0.6% at $50.04 a barrel following the meeting in Vienna. August Brent crude LCOQ6, +0.20% on London’s ICE Futures exchange rose 30 cents, or 0.6%, to $50.03 a barrel, moving back above the psychologically important $50 handle. “We will come up with a consensus”, he told reporters ahead of the meeting in Vienna.
The U.S. bank said that “fuelled by the lower prices, oil consumption around the world is booming on less efficient use (i.e. more SUV sales), less substitution effects (i.e. less electric vehicle sales or more propane use instead of biomass), and more economic demand (i.e. more miles driven or flown)”.
It touched lows under $48 after the meeting of OPEC members in Vienna failed to result in a deal to limit crude production.
Markets looked to that ceiling as a kind of guarantee. And outside players increasing their market share, recent meetings have failed to re-impose unity. He also called Iran a “key member” of OPEC and pledged Saudi Arabia will “cooperate with all” member countries. The Organization of Petroleum Exporting Countries’ de facto leader, Saudi Arabia, had previously discussed restoring an output target scrapped in December, delegates familiar with the matter said. Iran will want to export as much as it can as it reasserts itself in the worldwide markets, while Iraq also has a desperate need for oil revenues to pay its military and contractors.
The OPEC kingpin’s new oil minister, Khaled al-Falih, expressed confidence that the price recovery would continue.
OPEC officials said that since December, prices have risen by 80%, which they attributed to a response to production declines of about 1.2 million barrels per day (MMbbl/d) from the 2015 peak. The Standard & Poor’s 500 index closed at its highest level in seven months.
“There was consensus that market fundamentals are working and there wasn’t pressure on OPEC to think about influencing supply and demand”. US crude stockpiles dropped the third time in four weeks, according to a government report. Although lower than a 2.5 million-barrel draw forecast by analysts, the decline helped crude futures reverse early losses.
There are still several factors likely to prevent rapid price rallies in the coming months, said a Credit Suisse analysts report.
The crude market rebound lifted Wall Street and European stocks out of the red, removing the earlier sting from a 2 percent slump in Japanese shares.
Total domestic production (http://ir.eia.gov/wpsr/overview.pdf) also fell by 32,000 barrels a day to 8.735 million barrels a day, the EIA said.
Since 2014, oil prices have been extremely volatile and have driven a lot of United States shale players out of business.
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That “OPEC could not agree on a relatively benign deal which would have been constructive for price is a sign that political differences are undermining the organisation”, said Gary Ross, founder of US -based PIRA consultancy.
