Oil rises as OPEC meets,
volatility hits post-Doha high
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[September 26, 2016]
By Amanda Cooper
LONDON
(Reuters) - Oil rallied on Monday as the world's largest producers
gathered in Algeria to discuss ways to support the market, with nervous
trade driving volatility to its highest since exporters met in April.
Scepticism about any deal being reached has prompted money managers to
cut their bullish bets to a one-month low last week, when prices fell by
nearly 5 percent, dented by signs Saudi Arabia and Iran were making
little progress in achieving a preliminary agreement to freeze
production.
Members of the Organization of the Petroleum Exporting Countries are
meeting informally on the sidelines of the International Energy Forum in
Algeria from Sept. 26-28, where they will discuss a possible deal to
limit output.
Brent crude futures <LCOc1> rose 73 cents to $46.62 a barrel by 1052
GMT, having rallied from a session low of $45.74, while U.S. crude
prices <CLc1> rose 54 cents to $45.02 a barrel.
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Implied volatility, one gauge of how much the oil price moves, rose to
its highest since April 18, when a meeting in Doha among OPEC members to
discuss an output freeze ended in an impasse and the price hit a low
just above $40 a barrel.
Unplanned outages across OPEC countries still amount to around 2 million
barrels per day, according to SEB commodities strategist Bjarne
Schieldrop, which will make it difficult for members that are pumping
close to capacity to make way for the potential return of that shuttered
output.
"They will come away with nothing, because it is too difficult. How can
they decide a freeze when Libya is on the doorstep of returning
production, or Nigeria for that matter?" Schieldrop said.
Data from the U.S. Commodity Futures Trading Commission on Friday showed
hedge fund managers cut their net long position in crude oil to its
lowest in a month, having made the largest weekly addition to their
short positions on record. [CFTC/]
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A worker looks on at the Bashneft-Ufaneftekhim oil refinery outside
Ufa, Bashkortostan, Russia January 29, 2015. REUTERS/Sergei
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Sources told Reuters on Friday that Saudi Arabia did not expect a decision to be
made in Algeria, while Saudi Arabia had offered to reduce production if Iran
caps its own output this year, an offer to which Tehran had yet to respond.
"The fact countries like Algeria are still talking about a deal means it's still
on the table regardless of others' views about what might be happening," said
Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.
"I expect Algeria and Venezuela to keep pushing for a deal - it's imperative for
them to keep the price up," Barratt said.
(Additional reporting by Keith Wallis in Singapore; editing by Jason Neely and
Louise Heavens)
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