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Oil holds gains as Saudis see freeze as 'positive' for market
[HONG KONG] Oil held gains as Saudi Arabia's energy minister said an output freeze would be positive for the market and after a report that Iran will participate in informal talks next month.
Futures were little changed in New York after rising 1.2 per cent Thursday. A freeze will signify that producers are content with the current situation of the market, Saudi Arabian Energy Minister Khalid Al-Falih said, ruling out an output cut.
Iran will participate in the discussions in Algiers, a state news service reported. Oil suppliers want a deal to manage production, Opec's Secretary General Mohammed Barkindo told Arabic-language newspaper Al-Hayat.
Oil entered a bull market Aug 18, less than three weeks after tumbling into a bear market. Prices surged partly on speculation that informal discussions among members of the Organisation of Petroleum Exporting Countries may lead to action to stabilise the market.
A deal to freeze output was proposed in February, but a meeting in April ended with no final accord.
"While an agreement to limit production at current levels would largely be a symbolic gesture, judging by the market reaction to the announcement of these talks that might be enough to keep prices firm," said Michael McCarthy, a chief market strategist in Sydney at CMC Markets.
"The overhanging inventories and the agility of the US shale producers will limit the topside to somewhere around US$55 to US$60 a barrel."
West Texas Intermediate for October delivery was at US$47.36 a barrel on the New York Mercantile Exchange, up 3 US cents, at 8:27 am in Hong Kong. The contract rose 56 US cents to US$47.33 on Thursday. Total volume traded was about 83 per cent below the 100-day average. Prices are down 2.4 per cent this week.
Brent for October settlement was 1 US cent higher at US$49.68 a barrel on the London-based ICE Futures Europe exchange.
The contract increased 62 US cents, or 1.3 per cent, to US$49.67 on Thursday. Prices are down 2.4 per cent this week. The global benchmark crude traded at a US$2.31 premium to WTI.