Oil jumped as much as 4 percent on Monday as the world’s largest producers gathered in Algeria to discuss ways to support prices, with nervous trade driving volatility to its highest since a similar meeting to freeze output in April in Doha which failed.
The Organization of the Petroleum Exporting Countries and other exporters led by No. 1 producer Russia are meeting informally on the sidelines of the International Energy Forum in Algeria from Sept. 26-28 to discuss steps to tackle a price-eroding glut of crude.
Key OPEC member Iran, the fourth largest crude exporter which is still trying to recapture output before Western sanctions in 2012, downplayed the chances of a deal while some OPEC members remained hopeful.
Brent crude futures LCOc1 were up $1.54, or 3.4 percent, at $47.43 a barrel by 1:56 p.m. EDT (1756 GMT), after trading as high as $47.66.
U.S. West Texas Intermediate (WTI) crude futures CLc1 rose $1.58, or 3.6 percent, to $46.06, with its session high at $46.20.
Implied volatility, a gauge of how much oil prices move, was at its highest since April 18, when the meeting in Doha among OPEC members to discuss an output freeze ended in an impasse, leaving crude at just above $40.
Scepticism about any deal being reached prompted money managers to cut their bullish bets on U.S. crude futures to a one-month low last week, when prices fell by nearly 5 percent. [CFTC/]
Some analysts believe implementation of a freeze will only be after OPEC’s all-important policy meeting in Vienna in November. Until then, the group and non-members, including Russia and No. 1 oil consumer the United States, are likely to ramp up output.
“While we look for both Russia and the OPEC membership to continue to talk up the market via bullish hype whenever crude prices decline by a few dollars a barrel, we are maintaining a view that this type of artificial price support is simply delaying the inevitable by allowing non-OPEC production, especially from U.S. shale producers, to recover further,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
OPEC pumped near a multi-year high of 33.24 million barrels per day in August, data showed. Russian production hit record highs of 11.75 million bpd last week. U.S. output has fallen this year but its oil rig count, which signals future production, has risen for 12 of the past 13 weeks. [RIG/U]
“The Saudis, in particular, and OPEC, in general, must decide whether they wish to maximize revenue or output,” said a broker.
Unplanned outages across OPEC amounting to around 2 million bpd also make it hard for members to agree to a freeze, SEB commodities strategist Bjarne Schieldrop said.
“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.