Oil prices rise to
highest this month on hopes of OPEC deal
Send a link to a friend
[November 22, 2016]
By Sabina Zawadzki
(Reuters) - Oil prices rose on Tuesday to their highest this month as a
growing consensus emerged in the market that OPEC would overcome
internal disputes and scepticism to strike a deal that materially
reduces crude output.
Some warned a failure by the Organization of the Petroleum Exporting
Countries to reach agreement at a Nov. 30 meeting, or, more importantly
to implement it, would send prices crashing as a two-year glut of crude
Many in the market think OPEC would harm its reputation if a deal were
not struck and so focus has shifted to which countries would bear the
brunt of the cuts, when exactly the global market could become balanced
and how the cartel could raise prices without triggering a burst in U.S.
shale oil output.
Brent crude oil futures <LCOc1> were up 22 cents a barrel at $49.12 by
1212 GMT (7:12 a.m. ET), having earlier risen $1 in a push against the
$50 mark for the first time since the end of October.
U.S. West Texas Intermediate (WTI) crude futures <CLc1> were up 14 cents
at $48.38 a barrel.
Prices were boosted by comments from a Nigerian official attending an
OPEC technical meeting, which is trying to hammer out details of a deal,
that it was likely all countries would be "on board" by the end of
OPEC is trying to bring its 14 member and non-OPEC producer Russia to
agree on a coordinated cut to prop up the market by bringing production
into line with consumption.
It said at the end of September it aimed to cut production to between
32.5 million and 33 million barrels per day compared to its recent
record output of around 33.8 million bpd.
Doubts weighed over whether Saudi Arabia and Iran could put their
geopolitical disputes aside and whether countries whose finances are in
dire straits due to low oil prices would resist the urge to pump crude
at high rates.
"We have all along expected that OPEC would strike a deal as failure
would have further removed its credibility," said Ole Hansen, head of
commodity research at Saxo Bank.
[to top of second column]
An employee walks past oil tanks at a Sinopec refinery in Wuhan,
Hubei province, April 25, 2012. REUTERS/Stringer/File photo
"Once the dust settles and a deal has been reached, the market may want
to see whether the cartel is able, for the first time in years, to
comply with its own stated production targets.
While a ceiling for overall OPEC production may be agreed by Nov. 30, it
is unclear whether clear quotas per member state would be set. Some
countries, such as Nigeria, Iraq, Libya and Iran, argue they should be
exempt because their output has been hit by conflict or sanctions.
"Ultimately, it looks as if Saudi Arabia and its allied Gulf neighbors
will reduce production on their own," analysts at Commerzbank said.
"No ground-breaking agreement on production caps or cuts should be
expected from the OPEC meeting. The oil market is likely to remain
oversupplied for some time yet even after the OPEC meeting, especially
since U.S. oil production will soon start rising again."
(Reporting by Sabina Zawadzki; Additional reporting by Henning Gloystein
in Singapore; Editing by Dale Hudson and David Evans)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.