👀 Ones to watch: Undervalued stocks to buy before they report Q3 earningsSee Undervalued Stocks

Oil up 4 percent as OPEC meets, volatility hits post-Doha high

Published 09/26/2016, 02:21 PM
© Reuters. A worker looks on at the Bashneft-Ufaneftekhim oil refinery outside Ufa
LCO
-
CL
-

By Barani Krishnan and Amanda Cooper

NEW YORK/LONDON (Reuters) - Oil jumped as much as 4 percent on Monday as the world's largest producers gathered in Algeria to discuss ways to support prices, with nervous trade driving volatility to its highest since a similar meeting to freeze output in April in Doha which failed.

The Organization of the Petroleum Exporting Countries and other exporters led by No. 1 producer Russia are meeting informally on the sidelines of the International Energy Forum in Algeria from Sept. 26-28 to discuss steps to tackle a price-eroding glut of crude.

Key OPEC member Iran, the fourth largest crude exporter which is still trying to recapture output before Western sanctions in 2012, downplayed the chances of a deal while some OPEC members remained hopeful.

Brent crude futures (LCOc1) were up $1.54, or 3.4 percent, at $47.43 a barrel by 1:56 p.m. EDT (1756 GMT), after trading as high as $47.66.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) rose $1.58, or 3.6 percent, to $46.06, with its session high at $46.20.

Implied volatility, a gauge of how much oil prices move, was at its highest since April 18, when the meeting in Doha among OPEC members to discuss an output freeze ended in an impasse, leaving crude at just above $40.

Scepticism about any deal being reached prompted money managers to cut their bullish bets on U.S. crude futures to a one-month low last week, when prices fell by nearly 5 percent. [CFTC/]

Some analysts believe implementation of a freeze will only be after OPEC's all-important policy meeting in Vienna in November. Until then, the group and non-members, including Russia and No. 1 oil consumer the United States, are likely to ramp up output.

"While we look for both Russia and the OPEC membership to continue to talk up the market via bullish hype whenever crude prices decline by a few dollars a barrel, we are maintaining a view that this type of artificial price support is simply delaying the inevitable by allowing non-OPEC production, especially from U.S. shale producers, to recover further," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

OPEC pumped near a multi-year high of 33.24 million barrels per day in August, data showed. Russian production hit record highs of 11.75 million bpd last week. U.S. output has fallen this year but its oil rig count, which signals future production, has risen for 12 of the past 13 weeks. [RIG/U]

"The Saudis, in particular, and OPEC, in general, must decide whether they wish to maximize revenue or output," said a broker.

Unplanned outages across OPEC amounting to around 2 million bpd also make it hard for members to agree to a freeze, SEB commodities strategist Bjarne Schieldrop said.

© Reuters. A worker looks on at the Bashneft-Ufaneftekhim oil refinery outside Ufa

"They will come away with nothing, because it is too difficult. How can they decide a freeze when Libya is on the doorstep of returning production, or Nigeria for that matter?" Schieldrop said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.