Investing.com - Oil bulls have renewed hopes that OPEC will cut supplies before the year is out, giving crude prices some strength on Thursday as they headed for a third-straight week of losses.
Investors also bought oil on the dips after a near $10 drop in a barrel since the start of October, encouraged by the bargain hunting that was lifting Wall Street and other battered global equity markets, traders said.
U.S. West Texas Intermediate (WTI) crude settled up 51 cents, or 0.8%, at $67.33 per barrel. Its U.K. and international peer Brent rose 77 cents, or 1%, to trade at $76.94 by 2:40 PM ET (18:40 GMT).
Oil prices rose after OPEC signaled on Thursday it may have to return to production cuts as global inventories begin climbing, a move that may further sour its relations with U.S. President Donald Trump.
Trump has repeatedly lashed out at the producer group, accusing it of undersupplying the world in order to keep crude prices high. OPEC, plus Russia and other allied non-OPEC producers, agreed to pump more in June. But crude prices continued rising to four-year highs on fears of impending U.S. sanctions against Iran, pushing Brent to above $86 and WTI over $76.
In the past three weeks, however, oil prices crumbled amid a global rout in equities and talk that the Iranian sanctions may not squeeze the market that much after all. Outsize builds in U.S. crude stockpiles and a Saudi Arabia mired in crisis after the murder of high-profile journalist Jamal Khashoggi added to oil’s downside.
OPEC’s statement on Thursday aside, Saudi OPEC governor Adeeb Al-Aama told Reuters the oil market could be shifting towards oversupply due to a typical rise in inventories and slowing in demand in the fourth quarter.
Riyadh, being the top exporter of oil, will "mirror" those changes in its output, said Aama, who as Saudi OPEC governor is one of the country’s most senior oil industry officials after Energy Minister Khalid al-Falih.
Aama’s stance suggested a rethink in Saudi production strategy after Falih said earlier this week that the kingdom will pump as much crude as necessary to ensure minimum disruption to global supplies from U.S. sanctions on Iranian oil exports beginning Nov. 4.
Until Aama spoke on Thursday, Falih’s remarks had indicated that Saudi Arabia was essentially abandoning its commitment towards OPEC’s production-cutting agreement that helped oil prices recover from the oil glut of the past three years. The Saudi energy minister had said he was open to adding between one and two million barrels to daily Saudi production if required. Saudi output now runs at over 10 million barrels per day.
Some analysts and market participants took the latest OPEC statement and Aama’s remarks as the most logical step for producers amid the evolving supply situation in oil.
“I fear that the market is too complacent” about supply, said Phil Flynn, an analyst at Chicago Price Futures Group, who’s typically bullish on oil.
Other saw it as a sign of the worsening Saudi dilemma: Cut production and save oil prices from falling further, or submit to Trump’s demands for higher output and possibly escape US sanctions for the kingdom’s alleged involvement in the murder of the journalist Khashoggi.