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Oil prices soar 6% on renewed hopes of Opec output deal
[NEW YORK] Oil prices jumped 6 per cent on Tuesday, with US crude notching its biggest daily percentage gain in seven months, on renewed expectations that Opec will agree later this month to reduce a global supply glut.
Opec secretary-general Mohammed Barkindo will travel to member nations, including Iran and Venezuela, over the next several days to discuss the deal ahead of the group's meeting in Vienna on Nov 30.
The Organization of the Petroleum Exporting Countries agreed to an outline of the deal in September but with two weeks to go before the next meeting, disagreements persist among Opec members and non-Opec Russia on the exact details of the deal.
Saudi Energy Minister Khalid al-Falih is expected to travel to the Qatari capital, Doha, this week for meetings with oil-producing countries, including Russia, on the sidelines of an energy forum, sources familiar with the matter told Reuters.
Traders and analysts also said last ditch efforts by Opec to reconcile triggered a wave of short covering that helped to boost prices.
"There were a lot of new speculative shorts in the market because of the growing skepticism that they would be able to clinch a deal," said Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut, adding that those shorts got squeezed as a deal seemed more likely.
"You add to that some increased optimism over an Opec deal and you get a US$2 a move."
US crude ended the session US$2.49 higher at US$45.81 per barrel, a 5.8 per cent gain, its biggest daily percentage increase since early April.
Brent futures settled at US$46.95 a barrel, up US$2.52, or 5.7 per cent, its biggest percentage gain since Sept 28.
Both benchmarks also rebounded from three-month lows on Monday.
Prices pared some gains in post-settlement trade after data from industry group American Petroleum Institute (API) showed US crude inventories rose 3.6 million barrels in the week to Nov 11, versus analysts expectations of a 1.5 million-barrel build.
The US Department of Energy report is due at 10:30am EST (1530 GMT) on Wednesday.
News of an attack on a major oil pipeline in Nigeria, the Nembe Creek Trunk Line in the southern Niger Delta, gave an additional push to prices.
Oil markets have not yet fully determined the effects of a Donald Trump victory in the US presidential elections, analysts have said.
The Financial Times reported that Saudi Arabia warned Mr Trump that the incoming president will risk the health of his country's economy if he acts on his election promises to block oil imports.
From a technical point of view, there was some buying in US crude above the 200-day moving average, said Tony Headrick, an energy market analyst at CHS Hedging LLC.
"The extent of today's move is, I think, based in part on technicals."