Oil rises to three-week high amid OPEC output freeze speculation

Oil climbed to the highest level in more than three weeks amid speculation that crude producers will revive talks to stabilize prices.

Futures gained as much as 2.7 percent in New York. Prices climbed 6.4 percent last week as Saudi Arabia signaled it’s prepared to discuss stabilizing markets at informal OPEC discussions next month. Russia is open to talks for a joint output freeze “if necessary,” Energy Minister Alexander Novak told Saudi Arabian newspaper Asharq Al-Awsat.

Oil has rebounded more than 10 percent since closing below $40 a barrel and tumbling into a bear market earlier this month. Saudi Arabian Energy Minister Khalid Al-Falih said in a statement last week that talks with members of the Organization of Petroleum Exporting Countries and other producers may result in action to stabilize the market, according to the state-run Saudi Press Agency.

“We will probably move a bit higher on OPEC and speculation, but it will be hard to break out,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $133 billion of assets. “We’re close to what will be the average price.”

West Texas Intermediate for September delivery advanced $1.05, or 2.4 percent, to $45.54 at 11:09 a.m. on the New York Mercantile Exchange. It touched $45.69, the highest intraday level since July 21. Total volume traded was about 17 percent above the 100-day average.

Bullish Bets

Brent for October settlement added $1.06, or 2.3 percent, to $48.03 a barrel on the London-based ICE Futures Europe exchange, the highest price since July 15. The global benchmark crude traded at a $1.80 premium to WTI for October delivery.

Money managers bolstered their long position in WTI by 17,154 futures and options combined, the most since January, during the week ended Aug. 9, according to data from the Commodity Futures Trading Commission. Shorts, or bets on falling prices, increased 0.7 percent and were at a record for a second week. Net longs advanced 18 percent, the biggest jump since March.

“It’s really a question of whether the fundamental picture is going to improve and help us with a rally,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “We’ll find out if we’re going to see a continued rebalance in the market, a tightened supply and demand picture, in the coming weeks.”

U.S. producers added rigs for a seventh week, the longest run since 2014, according to Baker Hughes Inc. data on Friday. Rigs targeting crude in the U.S. increased by 15 to 396, the highest level since February. Explorers have now added 66 rigs since June 24, led by rising activity in the Permian Basin.

Oil-market news:

Hedge funds increased Brent net-long positions by the most contracts since May 17, according to data from ICE Futures Europe. The current cycle of low oil prices will end by late 2017, while a balancing of the market will take place next year, Russia’s Novak said in an interview with newspaper Asharq Al-Awsat. Venezuela has begun coordinating efforts among OPEC members and producers outside the group including Russia, Venezuelan President Nicolas Maduro said on state television. Nigeria will pump no more than 1.5 million barrels a day of oil this year as sustained attacks by militants have damaged infrastructure including its biggest export terminal, Minister of State for Petroleum Emmanuel Kachikwu said in an interview Friday.

-Bloomberg