Oil snapped four days of declines as Vladimir Putin said he’d like Russia and Opec to reach an output freeze apart from Iran, and the outlook for a US interest rate increase dimmed.
Futures rose 3% in New York. The Russian president said in an interview that he may recommend confirming a freeze plan when he meets with Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman at the Group of 20 summit in China this week. A freeze should exclude Iran until it raises production to pre-sanctions levels, he said.
Payrolls in the US climbed by less than expected in August, according to government data yesterday. US crude inventories rose last week, keeping supplies at the highest seasonal level in at least three decades, data showed on Wednesday.
Oil rose 7.5% in August amid speculation that talks in Algiers at the end of September may lead to an agreement to manage the market. A cap on production would be positive, Saudi Arabia’s Energy Minister Khalid al-Falih said in an interview last week, though he ruled out an output cut.
A freeze deal between members of the Organisation of Petroleum Exporting Countries (Opec) and other producers was proposed in February, but a meeting in April ended with no final accord.
“From the viewpoint of economic sense and logic, then it would be correct to find some sort of compromise,” Putin said in an interview in Vladivostok.
“I am confident that everyone understands that. We believe that this is the right decision for world energy.” Other producers are coming to the view that freezing production is right, Saudi Arabia’s Foreign Minister Adel al-Jubeir said in Tokyo yesterday, adding that he’s optimistic a deal is possible in Algiers.
“This is another strong sign that the odds of a production freeze are going up,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. “My sense is that we are very close to a deal because the major players seem to be on board with it.”
Payrolls climbed by 151,000 in August following a 275,000 gain in July that was larger than previously estimated, a Labour Department report showed in Washington yesterday. The median forecast in a Bloomberg survey called for 180,000. The lukewarm jobs report dimmed the outlook for an interest rate hike this month, weakening the dollar and bolstering the appeal of commodities priced in dollars as an investment.
“It’s a tough number for the Fed and it’s bullish for oil because if the Fed can’t raise rates, then oil is going to probably head higher,” Flynn said.
West Texas Intermediate for October delivery rose by $1.01 to $44.17 a barrel at 10:10am on the New York Mercantile Exchange. The contract lost $1.54 to close at $43.16 on Thursday. Prices are down 7% this week. Total volume traded was about 32% above the 100-day average.
Brent for November settlement climbed $1.17, or 2.6%, to $46.62 a barrel on the London-based ICE Futures Europe exchange. The contract slid $1.44 to $45.45 on Thursday. The global benchmark crude traded at a $1.85 premium to November WTI.
Opec’s crude production rose to a record in August as increased output from Gulf members made up for persisting losses in Nigeria and Libya, according to a Bloomberg survey. Supplies from the Organization of Petroleum Exporting Countries climbed by 120,000 barrels a day to average 33.69mn a day in August amid increases by Iran, Iraq and Kuwait, the survey of analysts, oil companies and ship-tracking data showed.
Russian Energy Minister Alexander Novak plans to meet the oil ministers of Saudi Arabia, Venezuela and Iran in Algiers, he said separately in Vladivostok yesterday. US crude stockpiles increased by 2.28mn barrels last week to 525.9mn, the Energy Information Administration reported Wednesday. Enbridge said it has withdrawn a regulatory application for its $2bn Sandpiper pipeline amid a slump in production in the Bakken.
Russian President Vladimir Putin looks on during an interview in Vladivostok, Russia, yesterday. Putin said he may recommend confirming an Opec output freeze plan when he meets with Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman at the Group of 20 summit in China this week.