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Oil at three-week high ahead of OPEC decision on output

2016-11-22 01:04 | Network |

Oil at three-week high ahead of OPEC decision on output
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© Reuters. The OPEC flag and the OPEC logo are seen before a news conference in Vienn

By David Gaffen

NEW YORK (Reuters) - Oil prices rose over 3 percent to a three-week high on Monday, catching a lift from a weaker dollar, as major oil producing countries appeared to be moving closer to agreeing to limit output.

Brent crude oil has risen 11 percent in a week since Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, started a diplomatic charm offensive to persuade the group's more reluctant members to join its proposed output plan. OPEC members are due to agree a world oil freeze pact with non-OPEC countries on Nov. 30.

In the last several days, several members of the group, including Iran, along with non-member Russia, have suggested they are likely to agree to a deal to limit output.

"When you’ve got all of the major players on board with a production cut, obviously you're very close to getting a deal done," said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

"You never know with OPEC - sometimes they go to the last minute and there are a lot of false starts."

Brent crude futures (LCOc1) rose $1.67 to $48.53 a barrel by 10:46 a.m. ET (1546 GMT), having touched $48.62, the loftiest level since Nov. 1. U.S. West Texas Intermediate (WTI) (CLc1) strengthened by $1.56 to $47.25 a barrel, after climbing as high as $47.33.

The dollar (DXY) also edged lower, easing off last week's 13-1/2-year highs as Treasury yields nudged lower, bolstering oil and the broader commodities complex including copper and gold .

Goldman Sachs analysts said in a note that the odds of an OPEC cut succeeding have increased, and believe the global oil surplus will shift into a deficit by the middle of next year, which would support prices.

Russian President Vladimir Putin said he saw no obstacle to freezing oil output, which at more than 11 million barrels per day is at a post-Soviet high.

OPEC members last week proposed a deal for Iran to cap, rather than cut, output.

Iran has been one of the main hurdles facing any curtailment, as Tehran wants exemptions to try to recapture market share lost under years of Western sanctions.

Libya and Nigeria, whose exports have been hampered by violence, have also asked to be left out of any deal. Nigeria's oil production fell to 1.63 million bpd in the third quarter from 1.69 million in the second quarter.

Hedge funds took a more cautious stance on oil prices amid the flurry of OPEC diplomatic, cutting their combined net long position in the three major Brent and WTI futures and options contracts by just 3 million barrels to 422 million barrels in the week ending Nov. 15.

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