Oil rebounds above $40, with eyes on Doha
Traders are setting their sights on the April 17 meeting, led by Russia and Saudi Arabia, to discuss measures to stabilise prices — including a production freeze at January 2016 levels.
There have been conflicting signals on whether such an agreement would be reached.
The world’s key producing nations are hoping to tackle a vast supply glut which has sent prices collapsing in recent years.
The market had dived last week after Saudi Deputy Crown Prince Mohammed bin Salman said his country would agree to limit output only if fellow producer Iran did the same.
However, prices have since pulled higher on supportive Kuwaiti comments and rising global stock markets.
“Oil sold off sharply in the wake of comments by Saudi Arabia stating that there would be no deal without Iran, and then saw a bounce after Kuwait came out and stated that a deal could go ahead without Iran,” said IG analyst Angus Nicholson.
US benchmark West Texas Intermediate for delivery in May was up $2.10 at $39.36 a barrel compared with Thursday’s close. Brent North Sea crude for June delivery won $1.79 to $41.22 a barrel.
Both contracts were also significantly higher compared with one week earlier.
“Positioning by different sides in the lead up to the meeting is likely to keep the price highly volatile,” added Nicholson.
“What is certain is that global assets’ correlation with the oil price has increased considerably over the past few weeks again as the potential for a renewed selloff in oil has started to concern markets.”
The oil market had eased Thursday, following a five percent rally the previous day in reaction to sliding US inventories that signal stronger demand in the world’s top crude consumer.
The US government’s Energy Information Administration (EIA) reported Wednesday that commercial crude inventories slumped 4.9 million barrels in the week ending April 1.
That confounded market expectations for a gain of 2.85 million, and followed a 2.3-million-barrel increase the previous week.
The figures helped prices build on healthy gains that came on the back of comments from Kuwait that the Doha meeting could indeed yield an agreement.
“Unfortunately, history is against anything (concrete) coming out of the Doha meeting,” analyst David Lennox of Fat Prophets in Sydney told AFP.
“But a lot of OPEC countries are feeling great economic pain, which might give them the impetus to take some positive action in cutting production,” he warned.
James Williams of WTRG Economics said the oil market will probably trade in a rocky fashion ahead of the gathering.
“Between now and the Doha meeting, we’re going to see the market up and down a lot depending on which member of OPEC says what,” Williams added.
Qatar has said all 13 OPEC members including Iran had been invited to the talks, along with key non-cartel producers,including Russia.
Oil has meanwhile been hit in recent months because of the return of Iranian crude to world markets — after years of economic sanctions on Tehran that were lifted following a nuclear deal last year.