Daily Times

LONDON: World oil prices rose modestly on Monday ahead of a producers’ meeting this week that may result in agreement on capping supplies.

Analysts warned however that optimism should be tempered by a stubborn supply glut and disagreement among members of the Organisation of the Petroleum Exporting Countries (OPEC). Around 1100 GMT, the US benchmark West Texas Intermediate for delivery in November was up 54 cents at $45.02 a barrel.

Brent North Sea crude for November added 60 cents to $46.49 a barrel compared with Friday’s close. Top global oil producers “must take a decision” to stabilise prices, Algeria’s energy minister said that on Sunday before an OPEC meeting due Wednesday in Algiers.

“Every state in the organisation agrees on the need to stabilise prices, it just remains for us to find a format that pleases everyone,” said Noureddine Boutarfa. “The best solution would be a (production) freeze,” he said. Oil prices collapsed from peaks of more than $100 a barrel in mid-2014 to near 13-year lows below $30 in January.

As a result, OPEC members are losing between $300 and $500 million a day, according to Boutarfa. “Crude prices rose on Monday following comments from Boutarfa on Sunday that OPEC members would not leave their informal meeting in Algiers on Wednesday empty-handed,” said analyst Bill Hodder at British-based consultancy Love Energy.

“A weak US dollar lent further support to prices,” he added. A faltering greenback makes dollar-priced oil cheaper for buyers using stronger currencies, thereby stimulating oil demand and price levels. OPEC and Russia are slated to begin meeting later Monday on the sidelines of the International Energy Forum in Algiers, looking for ways to stabilise prices that have been depressed since 2014.

Pre-forum talks last week between OPEC kingpin Saudi Arabia and member Iran were bleak, with neither willing to commit to freezing production, sending prices plunging more than 3.0 per cent on Friday.

– Price rebound –

Both major contracts rebounded on Monday after Boutarfa indicated that all options were still on the table. “With OPEC meeting on the sidelines of International Energy Forum for the next three days, and with the first (US) presidential debate happening tomorrow morning Asia time, expect oil to move on comments that range from hope to reality,” added OANDA market analyst Jeffrey Halley.

Despite the positivity, fears remain that an agreement cannot be reached. Previous attempts in April were scuppered by Iran, which had just emerged from years of Western-imposed nuclear-linked sanctions. “While several OPEC members have made positive noises in the lead up to talks, there are still questions over how effective any informal agreement might be,” cautioned Hodder.

“Iran have still not responded to Saudi Arabia’s offer to mutually freeze production, possibly indicating that it may be difficult for them to agree a deal on Wednesday.” Oil prices have been hammered by a stubborn supply glut since late 2014 that has seen supply far outweigh demand, sending both contracts to 13-year lows earlier this year.