Oil is heading for its biggest weekly advance since April amid speculation informal OPEC talks next month may lead to stabilization measures after prices tumbled into a bear market.
Futures climbed as much as 1.6 percent in New York after surging 4.3 percent Thursday. Discussions with members of the Organization of Petroleum Exporting Countries and non-OPEC producers may include possible action to stabilize the market, Saudi Arabia’s Energy Minister Khalid Al-Falih said in a statement, according to media reports, including Reuters. Global markets will continue to rebalance this year, according to the International Energy Agency.
Oil has fluctuated after falling more than 20 percent into a bear market and closing below $40 a barrel last week for the first time in almost four months. Refiners around the world will process record volumes of crude this quarter as their intake rebounds, shrinking brimming crude supplies, the IEA said in its monthly report on Thursday.
“The Saudi comments gave the market some life,” said Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney. “The talk is all about pushing the price higher and the market will speculate on whether they can actually pull a deal together. Calls from the IEA that the glut will start to shrink and consumption will pick up are also supportive.”
West Texas Intermediate for September delivery rose as much as 68 cents to $44.17 a barrel on the New York Mercantile Exchange and was at $43.79 at 8:13 a.m. London time. The contract gained $1.78 to $43.49 on Thursday, rebounding after a 3.1 percent drop during the previous two sessions. Total volume traded was about 41 percent above the 100-day average. Prices are up 4.8 percent this week.
Brent for October settlement was 18 cents higher at $46.22 a barrel on the London-based ICE Futures Europe exchange after rising as much as 1.4 percent earlier. The contract gained 4.5 percent to $46.04 a barrel on Thursday. Prices are up 4.4 percent this week. The global benchmark crude traded at a premium of $1.71 to WTI for October.
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While the market is on the path to rebalancing, reducing the inventory overhang of crude and products will take time, Al-Falih said in the statement. OPEC will hold informal talks at the International Energy Forum in Algiers, Mohammed Al Sada, Qatar’s energy minister and holder of OPEC’s rotating presidency, said in a statement on Monday.
A higher oil price is needed to stabilize the market, Venezuelan President Nicolas Maduro said on state television. Rosneft PJSC’s oil output grew in the second quarter amid a drilling surge, potentially marking a pivotal return to growth as Russia’s largest producer weathers the slump in crude prices. China’s oil production dropped 8.1 percent to 16.7 million metric tons last month from a year ago, according to data from the National Bureau of Statistics on Friday. That’s about 3.95 million barrels a day, sliding more than 2 percent from June.