Oil prices rise to 4-month highs as OPEC keeps output cuts in focus

Oil prices are at their highest levels since June 9 after OPEC announced plans to reduce production. Apache photo.

Oil prices up $6 in seven days

By Barani Krishnan

NEW YORK, Oct 6 (Reuters) – Oil rose more than 1 per cent to four-month highs on Thursday, spurred by another informal OPEC meeting on output cuts and plunging U.S. crude inventories, with some saying the market has overshot itself with a 15-percent gain in seven sessions.

Saudi, Iranian and Iraqi energy ministers will be among key OPEC representatives to meet non-OPEC member Russia on the sidelines of an energy conference next week in Istanbul, OPEC sources said.

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Oil has gained more than $6 a barrel since the Organization of the Petroleum Exporting Countries announced at informal talks in Algeria on Sept. 28 that it hopes to reduce output to 32.5 million-33 million barrels per day. That would remove about 700,000 b/d from a global glut estimated by analysts at 1.0 million-1.5 million b/d.

On top of OPEC’s pledged output cuts, prices were supported by the surprise drop in U.S. crude stocks for a fifth week in a row, bringing the total drawdown since the beginning of September to 26 million barrels, according to government data on Wednesday.

Brent crude was up 76 cents, or 1.5 percent, at $52.62 a barrel by 2:24 p.m. EDT (1824 GMT), rising earlier to $52.65, its highest since June 9.

U.S. West Texas Intermediate (WTI) crude rose 60 cents at $50.43, having broken above $50 for the first time since June 24.

Technically, Brent’s Relative Strength Index was at 69 while WTI’s was at 65 — just below the overbought level of 70.

Earlier on Thursday, prices pared gains just briefly after energy monitoring service Genscape reported a build of nearly 1 million barrels in stockpiles at the Cushing, Oklahoma delivery base for WTI during the week to Oct 4.

“It’s really crazy these markets,” said Carsten Fritsch, commodities strategist for Commerzbank in Frankfurt. “Prices rise, regardless of the news flow and any dip is being seen as buying opportunity.”

Oil crashed from above $100 a barrel in mid-2014 to around $26 in February this year from oversupply of up to 2 million b/d and OPEC’s refusal then to cut output.

OPEC’s policy meeting in Vienna on Nov. 30 will decide how the group’s members would contribute to the pledged cuts.

Algeria’s Energy Minister Nouredine Bouterfa told local media OPEC could ultimately reduce output by another 1 percent above the 700,000 b/d agreed in Algeria.

“We expect that Saudi will shoulder the bulk of the production cuts with a reduction of 5 percent or 0.5 million b/d, with other Gulf States cutting by 0.3 million b/d,” Bernstein Energy said in a note, adding that Iran, Libya and Nigeria were likely to get a “pass”.

(Additional reporting by Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; Editing by Marguerita Choy and Alexandra Hudson)