Oil extends gains as Saudi comments fan output cut hopes

Crude prices rose in Asia Friday, extending overnight gains after Saudi Arabia’s oil minister hinted producers could agree to limit production.

Rumours have been circulating that global producers are mulling a deal to freeze output to help stabilise the market.

Prices entered a “bear” market last week, falling more than 20 percent and closing below $40 a barrel for the first time since April.

Khalid al-Falih was reported as saying Thursday that an informal meeting of Organization of the Petroleum Exporting Countries (OPEC) countries next month would be the occasion for producers to discuss “any possible action”.

Prices soared more than four percent Thursday in reaction to the minister’s comments, which were seen as a positive development in a market grappling with a supply glut.

“Oil traders were spurred into action” by the comments, said Bernard Aw, market strategist at IG Markets Singapore.

At around 0730 GMT, US benchmark West Texas Intermediate for delivery in September was up 25 cents, or 0.57 percent, at $43.74 and Brent crude for October added 12 cents, or 0.26 percent, at $46.16 a barrel.

The rebound follows a drop in prices earlier this week after official US data showed a jump in crude inventories, taking by surprise investors who expected a drawdown in supply.

A monthly report from OPEC also showed Saudi Arabian oil production was at nearly 10.5 million barrels per day in July — a record high, above peak levels seen the same time last year.

But markets remain cautious, after meetings earlier this year failed to agree on any production ceiling as key crude producers preferred to fight for market share.

“Khalid al-Falih hinted at possible cooperation between OPEC and non-OPEC countries to curb production,” said Alex Furber, an analyst with CMC Markets.

“The likelihood of such an event, however, is questionable, given that the market was teased in a similar way back in April.”

OPEC’s informal meeting will take place on the sidelines of the International Energy Forum in Algeria from September 26 to 28, ahead of a planned meeting due at the end of November.

Stephen Innes, senior trader at OANDA Asia Pacific, said al-Falih’s comments had also affected equity markets.

“Despite signals pointing to a potentially enormous bulge in crude stocks for 2017, there appears to be no taming of the oil market bull when OPEC speaks,” he said in an email commentary.