Oil prices rebound ahead of OPEC energy ministers meeting
London/ New Delhi: With the Organisation of Petroleum Exporting Countries (OPEC) due to meet on the sidelines of a global energy summit in Algeria that got underway on Monday, crude prices rebounded, even as a report said that OPEC needs to cut production to sustain a rise in crude prices above $50 a barrel.
UK Brent crude gained 37 cents at $46.26 a barrel in early trade on Monday, over its previous close, after falling by $1.76, or 3.7 per cent on the London ICE Futures Exchange on Friday.
US West Texas Intermediate rose 32 cents to $44.80 a barrel after falling $1.84, or 4 per cent, in the previous session on the New York Mercantile Exchange.
A Dubai-based regional research firm said on the eve of the OPEC meeting that the oil producers cartel needs to cut production to sustain a rise in crude prices above $50 a barrel.
According to the Gulf Intelligence GIQ Industry Survey, “It does not matter if the world’s biggest oil producers agree to freeze output when they meet in Algiers later this week, because they must slash supply to support a protracted price rally.”
During September 26-28, Algeria is hosting meetings of the International Energy Forum and the 13-nation OPEC.
Crude prices rebounded after Algerian Energy Minister Noureddine Bouterfa said that all options were possible for an oil output cut or freeze at this week’s informal meeting of OPEC.
“We will not come out of the meeting empty-handed,” Bouterfa told reporters in Algiers on Sunday.
“I am very optimistic that OPEC members would reach a consensual agreement to restore stability to the up-and-down oil market,” he said.
American financial services firm Morgan Stanley in a report on Monday said: “Our base case is that OPEC will meet on September 28 without a formal statement. A nonbinding commitment to stabilise oil markets is possible, but it would likely lack teeth.”
“Rather, we expect OPEC to note how this meeting lays the foundation for a more constructive and formal discussion at the official November OPEC meeting,” it added.
Oil prices have fallen by more than two-thirds, from over $100 a barrel to under $30 between June 2014 and January 2016. Prices have recovered somewhat this year, rising to nearly $50 in May, before dropping to just over $40 a barrel in recent weeks.
Amid a global supply glut, leading producer Saudi Arabia recently indicated that there is no output freeze in the offing.
OPEC member Iran, attending the ongoing NAM summit, has been ramping up production to its pre-sanctions levels despite the recent supply glut.
Following its June meeting in Vienna when it decided against an output cut, OPEC, which accounts for 40 per cent of global crude output, said in a statement that its members were committed to a “stable and balanced oil market and that the market is moving through the balancing process”.
The price of the OPEC basket of 13 crudes closed trade on Friday at $42.89 a barrel.
The Indian basket, composed of 73 per cent sour grade Dubai and Oman crudes, with sweet grade UK Brent making up the rest, closed trade on Friday at $44.70 per barrel.
It was reported that Iran’s crude oil exports touched a five-year high in August at 2.11 million barrels per day — up 15 per cent from its July exports.
Amid the recent fluctuation in global oil prices, state-run Indian Oil Corp (IOC) moved in contradictory ways on its latest fortnightly revision in transport fuels, increasing the price of petrol by 58 paise a litre and decreasing diesel by 31 paise per litre effective from September 16 — both at Delhi, with corresponding changes in other states.