Oil up 4 percent as Saudis mull meeting, tighter market forecast
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A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. REUTERS/Richard Carson
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By Devika Krishna Kumar
NEW YORK (Reuters) - Oil prices jumped the most in a month, rising more than 4 percent on Thursday, after comments from the Saudi oil minister about possible action to stabilize prices triggered a round of buying and the International Energy Agency forecast crude markets would tighten in the second half of 2016.
Saudi Energy Minister Khalid al-Falih said OPEC members and non-members would discuss the market situation, including any action that may be required to stabilize prices, during an informal meeting on Sept. 26-28 in Algeria.
The comments by the minister of the world's top oil exporter triggered fund buying and some short covering, giving a boost to prices, traders and brokers said.
Many traders remain skeptical of the outcome of the meeting, expecting a repeat of the Doha meeting in April when talks fell through after Saudi Arabia backed out, citing Iran's refusal to join in a so-called production freeze.
The IEA, which advises large developed economies on energy policy, forecast a healthy draw in global oil stocks in the next few months that would help ease a glut that has persisted since 2014 on the back of rising OPEC and non-OPEC supply.
"The markets clearly are deriving support from both the IEA report and statements from the Saudi oil minister," said Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut.
"In a crude market that has seen a combined increase of 200,000 gross short speculative positions over just the past six weeks, any talk of a potential coordinated effort from producers, no matter how unlikely the prospect, will lead to short covering."
Both benchmarks notched their biggest daily percentage gain in a month. U.S. crude
Many analysts say they see oil prices trading within a range for the next few weeks, but if Saudi Arabia talks up the market, the potential for a significant drop in prices are high.
"The Saudis benefit from talking this market up ... they buy a little time and give the market a chance to acquire better balance," said Jim Ritterbusch, president of Chicago-based energy advisory Ritterbusch & Associates.
"If at the end of the day the Saudis don't go along with an agreement to cut production, the market will go right down, just like last time."
U.S. refined products futures, including gasoline
Ultra-low sulfur diesel futures soared 5 percent to a session high of $1.3934 a gallon, their highest since July 21 after the news.
Diesel crack spreads <1HOc1-Clc1>, a key measure of margins for refiners, jumped as much as 7.7 percent to a high of $14.72 during the session.
(Additional reporting by Scott DiSavino in New York, Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Matthew Lewis)
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Create E-mail Alert Related CategoriesCommodities, Reuters
Related EntitiesCrude Oil, OPEC, Definitive Agreement
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