Oil prices rose more than 1% yesterday after reports that Iran was sending positive signals that it may support joint Opec action to prop up the market.
The third-largest producer in the Organisation of the Petroleum Exporting Countries, Tehran has been boosting output since the lifting of Western sanctions in January. It refused to join a previous attempt this year by Opec plus non-members such as Russia to stabilise production, and talks did not progress in April.
Although it has not said if it will join an effort to curb production at a meeting of Opec and other producers in September, Iran appears more willing this time to reach an understanding on the matter, sources in Opec and the oil industry told Reuters.
“Iran is reaching its pre-sanctions production level soon and after that it can co-operate with the others,” said a source familiar with Iranian thinking after a visit by Venezuelan Oil Minister Eulogio Del Pino to Tehran as part of a tour to convince Opec of a production freeze.
Brent crude settled up 80 cents, or 1.6%, at $49.96 a barrel, while US West Texas Intermediate (WTI) crude rose 69 cents, or 1.5%, to close at $48.10 yesterday.
News of Iran’s potential support for a production freeze helped halt an abrupt slump in oil prices that began on Monday, after a 20% rally in the past two weeks.
Despite rebounding this year, oil still trades at less than half of mid-2014 levels, with the market still worried about a glut that spurred the biggest price rout in a generation.
The selloff has battered the economies of Venezuela, Iraq and Nigeria.
Goldman Sachs forecast $45-$50 for a barrel of oil through summer 2017, maintaining its view of weak fundamentals in the near term.
Opec members are due to meet informally in Algeria next month on the sidelines of the International Energy Forum (IEF). Russia is also expected to attend the IEF.
Venezuela has for months sought to rally producers towards an agreement to limit production. Del Pino was in Tehran on August 15 before flying to Jeddah in Saudi Arabia.
Iran confirmed its participation in the Opec meeting in Algeria, an Opec source said yesterday.
Russia, which in April was ready to freeze production, now wants to see an internal agreement among Opec before it commits to rejoining an initiative.