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Crude surges 5% amid reports that OPEC oil could hit $50 a barrel

Published 03/07/2016, 02:25 PM
Updated 03/07/2016, 02:36 PM
© Reuters.  Both Brent and WTI crude rose sharply to close above $37 a barrel on Monday -- Crude futures surged more than 5% on Monday, after a report surfaced that OPEC producers are privately crafting a strategy to stabilize the price of oil at $50 a barrel.

On the New York Mercantile Exchange, WTI crude for April delivery wavered between $36.09 and $38.09 a barrel, before settling at $37.91, up 1.99 or 5.54% on the session. At session-highs, U.S. crude futures hit their highest level since their first session of the new year. Since falling to 13-year lows in mid-February, WTI crude has rallied more than 30% amid mounting speculation of an imminent production freeze by OPEC, the world's largest oil cartel.

On the Intercontinental Exchange (ICE), brent crude for May delivery traded in a broad range between $38.88 and $41.04 a barrel, before closing at $40.80 up 2.09 or 5.38% on the day. North Brent Sea crude futures closed higher for a seventh straight session and the ninth time in the last 10 trading days. After briefly falling below $30 a barrel on February 11, brent futures have also soared by more than 28%.

Oil prices extended considerable 8% gains from last week, amid heavy short covering. As a result, both the U.S. and international benchmark of crude are trading near 2016 highs.

Speaking exclusively with Reuters, Gary Ross the executive chairman of the New York-based consultancy PIRA, cautiously advised that oil prices may have bottomed at last month's lows below $30 a barrel. Crude futures last topped $50 last October, following two extended downturns in 2015. In recent weeks, crude prices have rebounded amid reports that Russia, Saudi Arabia and two other OPEC producers could agree to cap output at their respective levels from January.

"They want $50 oil, this is going to become the new anchor for global oil prices," Ross told Reuters. "While it may not be an official target price, you’ll hear them saying it. They’re trying to give the market an anchor."

Despite Ross' comments, energy traders are still looking for signals that a record-high supply glut could abate before prices continue to rally even further. Over the last month and a half U.S. crude production has fallen steadily, decreasing in each of the last six weeks. As a result, output has dipped below 9.1 million barrels per day for the first time in 2016. At the same time, U.S. oil rigs fell by eight to 392 for the week ending on Feb. 26, moving lower for the 11th consecutive week. With the declines, the rig count fell to its lowest level since Dec. 4, 2009 and one away from an all-time record low.

Major reductions in the number of oil rigs nationwide typically provide lagging indications that production is about to level off.

Meanwhile, production in Russia and Saudi Arabia remains near-record monthly highs above 10 million bpd.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.20% to an intraday low of 97.05 in U.S. afternoon trading. Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.

Latest comments

UUP is up 24.56 +.201 but not a even a new bit about it. Only gold is going down.
Fundamentals are meaningless. It's all about "reports" and rumours ...
You are absolutely correct.
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