New York: Oil advanced on speculation Opec members may agree on a supply-cut proposal from Algeria at an informal meeting in Algiers.
Futures rose as much as 3% in New York after Mossa Elkony, the head of Libya’s delegation, said “it seems there will be an agreement.”
Algeria proposed a 796,000 barrel-a-day cut for Opec output, according to a document seen by Bloomberg. Saudi Arabia and rival Iran expect no accord to come from Wednesday’s talks but left open the possibility of a deal in November. Prices fell earlier as a government report showed a US gasoline supply gain.
“The Opec talks are overshadowing the fundamentals,” said Matt Sallee, who helps manage $15 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas.
West Texas Intermediate for November delivery climbed $1.27, or 2.8%, to $45.94 a barrel at 1:46pm on the New York Mercantile Exchange. Total volume traded was 35% above the 100-day average.
Brent for November settlement rose $1.45, or 3.2%, to $47.42 a barrel on the London-based ICE Futures Europe exchange. The global benchmark was at a $1.48 premium to WTI.
The Algerian proposal would see every Opec member with the exception of Libya, Nigeria and Iran reduce their output by 1.6% from the average January-to-August level. Iran will be allowed to increase output to 3.7 million barrels a day, slightly higher than in August, because its ceiling would be calculated as an average from 2001 to 2011. So far, Tehran has insisted it wants a production ceiling around 4 million barrels a day.
Nigeria and Libya, which are suffering from sabotage and civil war, are “excluded given their exceptional circumstances,” according to the document.
Before the closed-door meeting, Iran’s oil minister Bijan Namdar Zanganeh told reporters in Algiers that Opec had made progress, although he cautioned that the group may have to wait until its next official meeting in Vienna in late November to close a deal.
Crude supplies fell by 1.88 million barrels last week while gasoline inventories increased 2.03 million, according to the Energy Information Administration. The industry-funded American Petroleum Institute reported that both crude and gasoline stockpiles dropped in a report on Tuesday.
“I think you had a lot of people expecting declines across the board after the API data yesterday,” said Kyle Cooper, director of research with IAF Advisors in Houston. “When the number didn’t live up to the hype from yesterday prices fell.”
Crude supplies fell to 502.7 million in the week ended 23 September, the lowest since February, according to EIA data. Stockpiles remain at the highest seasonal level in more than 20 years. Imports of crude slipped 5.7% to 7.84 million barrels a day last week. Production slipped 0.2%.
“In four weeks we’ve had a 23 million barrel decline in crude inventories domestically,” Sallee said. “There’s a little light at the end of the tunnel. Inventories should keep falling as long as production continues to fall, demand holds up and imports remain around the 8 million barrels a day.”
Refineries cut operating rates by 1.9 percentage points to 90.1% of capacity, the lowest level since May. Plants usually cut back on operations in September and October after the peak driving season comes to an end. Bloomberg