London/ Singapore: Oil prices rose on Thursday as expectations of an Organization of the Petroleum Exporting Countries (OPEC) deal to limit production outweighed growing evidence of global oversupply and rising inventories, particularly in the United States.
Saudi energy minister Khalid al-Falih said on Thursday he was optimistic OPEC would formalise a preliminary oil output deal reached in Algeria in September.
“I’m still optimistic that the consensus reached in Algeria for capping production will translate, God willing, into caps on states’ levels and fair and balanced cuts among countries,” he told Al-Arabiya TV.
Falih said he believed the market was on its way to becoming balanced and that an agreement by the OPEC at its meeting in Vienna on 30 November would speed the recovery.
Brent crude oil was up 60 cents a barrel at $47.23 by 11.20 GMT. US light crude was up 50 cents at $46.07.
US crude inventories rose by 5.3 million barrels in the week ending 11 November, well above forecasts of an increase of 1.5 million barrels, data from the US energy information administration showed on Wednesday.
Stocks are also rising elsewhere, thanks to record output by OPEC, which pumps around 40%of world oil supply. “The name of the game is ‘volatility’ as confusing signals are arriving before OPEC meets,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.
“We have evidence of oversupply—US stocks rising - versus hopes for some action by OPEC,” Venezuelan President Nicolas Maduro said on Wednesday OPEC countries are ready to reach a “forceful” agreement on cutting oil output. Maduro met OPEC Secretary-General Mohammed Barkindo in Caracas to discuss a possible OPEC deal.
Russia has also expressed willingness to support an OPEC decision to freeze output, Russian Energy Minister Alexander Novak said.
But rising oil production and changing fundamentals “make a credible OPEC cut all the more difficult to achieve”, Jason Gammel, analyst at US investment bank Jefferies, said. “The physical market has shifted back to oversupply because of surging OPEC output, with the most material increases driven by improving security conditions in Libya and (tenuously) Nigeria,” he said.
Jefferies expects Brent to average $58 a barrel next year. Reuters