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Oil hits 4-month high on Opec speculation; cut gains on dollar
[NEW YORK] Oil prices drifted on Tuesday, with Brent hitting four-month highs on a rally inspired by OPEC plans to tighten output before pulling back as a surging dollar weighed on greenback-denominated commodities.
Weaker equity prices on Wall Street also limited oil's run higher.
Brent crude was up 13 cents at US$51.02 a barrel by 11:19 am EDT (1519 GMT). It rose to US$51.37 at the session peak and its highest since June 10. Earlier, Brent fell to US$50.34. after settling on Monday at US$50.89.
US West Texas Intermediate (WTI) crude was down 3 cents at US$48.78. The session high for WTI was US$49.13, its highest since July 5.
The dollar hit a 13-day high against a basket of major currencies on bets for a hike in US interest rates before the year-end.
"The Opec deal looks more and more like hot air but oil's still very technically driven," said Stig Rasmussen, a senior proprietary trader at Danske Commodities in Aarhus, Denmark. "For Brent, the next target is $US52.86. I imagine at that point shale oil companies will be hedging bigger volumes for 1-2 years ahead."
US shale producers were hedging future oil output at their highest levels this year, analysts at Morgan Stanley noted on Monday. The rush to hedge came as the calendar 2017 strip climbed to US$52.29, its highest since mid-August.
Oil has gained more than 10 per cent in five sessions since the Organization of the Petroleum Exporting Countries revived hopes that its members and other major oil producers will contribute to limiting output when Opec meets on Nov 30 for its policy meeting.
Tuesday's highs in Brent came after news that a delegation from Iran's energy ministry will visit Russia in October-November to present potential oil deals to Russian companies.
Russian news agency Interfax reported Russian Energy Minister Alexander Novak as saying that experts from Russia and Saudi Arabia would determine a date for the energy ministries'meeting in the near future.
Opec's target is to bring its production to between 32.5 million and 33.0 million barrels per day by cutting some 700,000 bpd from a glut of about 1.0-1.5 million bpd estimated by analysts.
But a Reuters survey last week showed Opec output likely reached likely a record high of 33.6 million bpd in September. Individual members of the group such as Iran and Libya have also announced more supply plans.