Oil up over 1% as Iran signals support for OPEC freeze action
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New York: Oil prices rose more than 1% on Tuesday after Reuters reported that Iran was sending positive signals that it may support joint OPEC action to prop up the market.
The third-largest producer in the Organization of the Petroleum Exporting Countries, Tehran has been boosting output since the lifting of Western sanctions in January. It refused to join a previous attempt this year by OPEC plus non-members such as Russia to stabilise production, and talks collapsed in April.
Although it has not said if it will join an effort to curb production at a meeting of OPEC and other producers in September, Iran appears more willing this time to reach an understanding on the matter, officials in OPEC and the oil industry told Reuters.
“Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others,” said a official familiar with Iranian thinking after a visit by Venezuelan oil minister Eulogio Del Pino to Tehran as part of a tour to convince OPEC of a production freeze.
Brent crude settled up 80 cents, or 1.6%, at $49.96 a barrel, while US West Texas Intermediate (WTI) crude rose 69 cents, or 1.5%, to close at $48.10.
News of Iran’s potential support for a production freeze helped halt an abrupt slump in oil prices that began on Monday, after a 20% rally in the past two weeks.
Despite rebounding this year, oil still trades at less than half of mid-2014 levels, with the market still worried about a glut that spurred the biggest price rout in a generation.
The selloff has battered the economies of Venezuela, Iraq and Nigeria, which are more anxious to boost crude prices than major OPEC producers such as Saudi Arabia and Iran, which are more keen in protecting market share.
Many analysts remain sceptical of the effort.
“The current price level of well over $40 does not provide non-OPEC producers with any kind of motivation to support oil prices by cutting or maintaining current production levels,” said Tamas Varga, analyst at London-based energy broker PVM.
Prime Minister Haider al-Abadi said Iraq had not reached its full oil exports potential as his government urged foreign oil firms in the country to raise output.
Goldman Sachs forecast $45-$50 for a barrel of oil through summer 2017, maintaining its view of weak fundamentals in the near term.
The market was awaiting US oil stockpile data, due from trade group American Petroleum Institute (API) at 4:30 pm EDT (2030 GMT) and official government data on Wednesday. Analysts polled by Reuters forecast crude stocks fell 500,000 barrels last week. Reuters
Additional reporting by Alex Lawler in London and Henning Gloystein in Singapore.