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Oil hits August high on potential producer action to prop up market
[SINGAPORE] Oil prices rose on Monday to fresh highs for the month of August, with the Brent benchmark gaining 11 per cent since the start of the month, as speculation intensifies about potential producer action to support prices in an oversupplied market.
Brent crude oil futures rose to a high for the month of US$47.40 a barrel on Monday before dipping back to US$47.30 per barrel at 0644 GMT, up 33 US cents from their last settlement, and 11.3 per cent above the last close in July.
US West Texas Intermediate (WTI) crude futures rose to a high of US$44.95 a barrel before dipping to US$44.85 a barrel, still up 36 US cents from their last close.
WTI has gained more than 7 per cent in August.
"Oil posted another ... gain as speculation of potential production freezes by Opec picked up pace. Saudi Arabia signalled that it is prepared to discuss stabilising the markets at informal Opec discussions next month," ANZ bank said. "This was despite another strong rise in drilling activity in the US ... Baker Hughes data showed the number of rigs operating in the US rose by 15 last week to 396," it added.
After falling sharply from over 1,600 in 2014, before the price rout started, to a low of just 316 in late May, the US oil rig count has steadily risen since then as US producers have adjusted to lower prices.
Morgan Stanley said that weak fundamentals would eventually begin to outweigh the bullish sentiment that has recently lifted prices.
"Fundamentals tend to be a stronger driver medium term, and the picture appears skewed negative over the coming months," the US bank said.
It cited high production and swelling inventories as well as an ongoing glut in the fuel market which is likely to spill back into the crude sector as refiners cut back production and orders for crude as a feedstock.
In a sign of an ongoing fight between Middle East producers for Asian market share, Iran's crude exports to South Korea rose in July to nearly four times the level of a year ago, and 5.9 per cent higher than the previous month.
South Korea imported 1.10 million tonnes of Iranian crude oil last month, compared with just 286,374 tonnes imported a year earlier when sanctions were still imposed on Tehran, government data showed on Monday.
On the demand side, the world's three-biggest economies - the United States, China and Japan - all published downbeat economic data between Friday and Monday.
The countries are also among three of world's five-biggest crude consumers and traders said slower economic growth in those countries could start weighing on crude markets.