You are here
Oil rebounds from three-month lows on renewed hopes for Opec cut
[NEW YORK] Oil prices were largely steady on Monday, rebounding from three-month lows, on a report saying that Opec members were seeking to resolve their differences on a deal to cut production ahead of a meeting later this month.
Opec kingpin Saudi Arabia and fellow exporters Iran and Iraq have been at odds over how to rein in supply to reduce a glut in global markets. The lack of agreement within the Organization of the Petroleum Exporting Countries following a tentative deal in September has put pressure on benchmark prices.
Qatar, Algeria and Venezuela were leading the push to overcome the divide between the group's biggest producers ahead of an output policy meeting on Nov 30 in Vienna, according to a Bloomberg report. Saudi Arabia, Iraq and Iran are still at odds over how to share output cuts, the report said.
Saudi Energy Minister Khalid al-Falih said it was imperative for Opec to reach a consensus on activating the deal made in September in Algiers to cut production, according to Algeria's state news agency APS on Sunday.
Brent crude futures settled at US$44.43 per barrel, down 0.72 per cent, after falling to as low as US$43.57. US crude ended the session down 0.2 per cent at US$43.32, after hitting a low of US$42.20. Both benchmarks' session lows were the weakest since Aug 11.
"Record Opec production clearly has the market nervous about a potential deal, but we believe that most Opec producers are already producing flat out as much as they can," said Michael Tran, director of energy strategy at RBC Capital Markets in New York.
"The current aggressive push in production is to be expected given that each producing country is trying to position itself ahead of the meeting later this month."
Opec said on Friday its output hit a record 33.64 million barrels per day in October, and forecast an even larger global surplus in 2017 than the International Energy Agency.
The risk of US production growth in the event Opec cannot reach a deal is also a factor weighing on crude markets, given that producers hedged aggressively last month when prices spiked north of US$50, RBC's Mr Tran said.
US shale producers are redeploying cash, rigs and workers, cautiously confident the energy sector has turned a corner after Donald Trump's US presidential election victory and Opec's recent signal that it plans to curb production.
Mr Trump's surprise win in last week's election boosted the US dollar and stocks but undermined oil.
"In our view the oil market has not yet attempted to fully factor a Trump presidency into prices," Standard Chartered said in a note.
"We think that market views on the effect of a Trump presidency on oil have yet to firm up, beyond perhaps a loosely defined feeling that Trump might provide a further boost for the US dollar and for the prospects of US shale oil."
In advance of the election, speculators including hedge funds and money managers cut their net long US crude futures and options positions in the week to Nov 8 to the lowest since Sept 25, the US Commodity Futures Trading Commission (CFTC) said.