Oil rises as producers announce meeting on output freeze
SINGAPORE | BY HENNING GLOYSTEIN
Reuters
Reuters
March 16, 2016
Oil prices edged up on Wednesday on an upcoming meeting in Qatar to discuss an output freeze and on expectations of U.S. production declines, but analysts warned that neither the freeze nor the declines point to the end of a global supply glut.
U.S. crude futures CLc1 were trading at $36.64 per barrel at 0756 GMT, up 30 cents from their last settlement.
Brent LCOc1 was up 11 cents at $38.85 a barrel.
Oil rose after prices dropped about 2 percent the previous session.
Sources at the Organization of the Petroleum Exporting Countries (OPEC) said a meeting of producers led by Saudi Arabia and Russia to discuss an output freeze will take place on April 17, even without Iran.
Producers are considering pegging output at January levels, when both Saudi Arabia and Russia were both producing near record levels of over 10 million barrels per day (bpd).
Iran's production, however, was still low due to sanctions that cut its output to little over 1 million bpd, and Tehran has said that it would only participate once its production hits 4 million bpd from a current 3 million bpd.
Analysts said that talks about freezing output would do little to rein in a global glut that sees over 1 million barrels of crude produced every day in excess of demand.
"Any such deal would still not be a game changer. It would really just maintain the excess supply that is now in place," Thomas Pugh of Capital Economics said in a note.
Prices also received support from expectations of lower U.S. production resulting from financial distress.
"For today, we may see some strength for prices coming from possible U.S. production declines," said Singapore-based brokerage Phillip Futures.
U.S. shale producer Linn Energy (LINE.O) said on Tuesday that bankruptcy may be unavoidable as the company missed interest payments amid a slump in oil prices of as much as 70 percent since mid-2014.
Other companies, also fighting for survival, are seeking risky and costly borrowing from private equity firms.
Traders said that Wednesday's focus would shift to the U.S. where official production and inventory data will be released later in the day.
That data is expected to show crude inventories rose to a record for a fifth straight week.
Despite Wednesday's price rises, oil markets remain dogged by the glut, and traders warned that a recent bull-run which saw crude markets jump over 40 percent from multi-year lows earlier this year was overblown due to its speculative nature.
"Producers are not buying the rumor-mill... In fact, it is just the opposite: speculators are buying what producers are selling... Speculators are record long Brent (on ICE) while producers are record short... Who do you think is going to win out?" said the U.S.-based Schork Report in a note to clients.
Oil prices edged up on Wednesday on an upcoming meeting in Qatar to discuss an output freeze and on expectations of U.S. production declines, but analysts warned that neither the freeze nor the declines point to the end of a global supply glut.
U.S. crude futures CLc1 were trading at $36.64 per barrel at 0756 GMT, up 30 cents from their last settlement.
Brent LCOc1 was up 11 cents at $38.85 a barrel.
Oil rose after prices dropped about 2 percent the previous session.
Sources at the Organization of the Petroleum Exporting Countries (OPEC) said a meeting of producers led by Saudi Arabia and Russia to discuss an output freeze will take place on April 17, even without Iran.
Producers are considering pegging output at January levels, when both Saudi Arabia and Russia were both producing near record levels of over 10 million barrels per day (bpd).
Iran's production, however, was still low due to sanctions that cut its output to little over 1 million bpd, and Tehran has said that it would only participate once its production hits 4 million bpd from a current 3 million bpd.
Analysts said that talks about freezing output would do little to rein in a global glut that sees over 1 million barrels of crude produced every day in excess of demand.
"Any such deal would still not be a game changer. It would really just maintain the excess supply that is now in place," Thomas Pugh of Capital Economics said in a note.
Prices also received support from expectations of lower U.S. production resulting from financial distress.
"For today, we may see some strength for prices coming from possible U.S. production declines," said Singapore-based brokerage Phillip Futures.
U.S. shale producer Linn Energy (LINE.O) said on Tuesday that bankruptcy may be unavoidable as the company missed interest payments amid a slump in oil prices of as much as 70 percent since mid-2014.
Other companies, also fighting for survival, are seeking risky and costly borrowing from private equity firms.
Traders said that Wednesday's focus would shift to the U.S. where official production and inventory data will be released later in the day.
That data is expected to show crude inventories rose to a record for a fifth straight week.
Despite Wednesday's price rises, oil markets remain dogged by the glut, and traders warned that a recent bull-run which saw crude markets jump over 40 percent from multi-year lows earlier this year was overblown due to its speculative nature.
"Producers are not buying the rumor-mill... In fact, it is just the opposite: speculators are buying what producers are selling... Speculators are record long Brent (on ICE) while producers are record short... Who do you think is going to win out?" said the U.S.-based Schork Report in a note to clients.
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