Oil advances as traders look to OPEC, Russia for signs of output freeze
Wednesday September 7, 2016
Futures rose 1.5 percent in New York. Iran will support efforts to bring about fair prices while it restores output lost to sanctions, President Hassan Rouhani said Tuesday. Still, a production-freeze deal is unlikely, said David Fyfe, Gunvor Group Ltd.'s head of market research and analysis. The market remains well supplied as U.S. stockpiles, already more than 100 million barrels above the five-year seasonal average, are forecast to have grown for a third week.
Oil rallied in August on speculation that members of the Organization of Petroleum Exporting Countries and other producers would agree to cap output when they meet informally in Algiers this month. A similar proposal collapsed in April because Iran refused to join, while Saudi Arabia insisted that its rival take part. Iranian output is approaching its pre-sanctions target, Mohsen Ghamsari, director for international affairs at the National Iranian Oil Co., said Wednesday.
Market Skepticism
Most oil market analysts are very skeptical about the chances of an agreement,†said Mike Wittner, head of oil-market research at Societe Generale SA in New York. I'm becoming less skeptical because the situation has changed since April. The main difference is that Iran has increased output to close their goal and appears amenable to the idea.â€
West Texas Intermediate oil for October delivery rose 67 cents to settle at $45.50 a barrel on the New York Mercantile Exchange. It's the highest settlement since Aug. 30. Total volume traded was 12 percent below the 100-day average.
Futures rose from the settlement after the industry-funded American Petroleum Institute was said to report U.S. crude supplies tumbled 12.1 million barrels last week. WTI traded at $46.09 at 4:39 p.m in New York.
Brent for November settlement climbed 72 cents, or 1.5 percent, to $47.98 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $1.83 premium to WTI for November delivery.
Iran's Production
The U.S. and European Union tightened sanctions on the Islamic Republic in 2012 over its nuclear program. Cut off from global oil markets, Iran's production fell to around 2.5 million barrels a day compared with more than 4 million in mid-2008. The country has boosted output quickly since the easing of sanctions in January, though additional increases may be a challenge without international investment and tec...