Top oil producers Russia and Saudi Arabia have agreed to freeze output ahead of a much-anticipated producers meeting in Doha, Qatar, on Sunday, an Interfax news agency report said.
Russia's Interfax quoted a diplomatic source in Doha as saying that Russia and Saudi Arabia reached a consensus on Tuesday about an output freeze and that the final decision will not depend on Iran.
The output freeze news came as the US government said that US crude output was forecast to fall by 560,000 barrels per day in 2017 to 8.04 million bpd, underscoring that the 21-month price rout is picking up steam.
"People are now realizing that this Opec meeting could be a historic turning point for the market," said Phil Flynn, an analyst at Price Futures Group. "Now, with US production cuts, our sense is that we're entering a new cycle upwards."
Brent crude prices settled up $1.86, or 4.3 per cent, at $44.69 a barrel.
US crude settled up $1.81, or 4.48 per cent at $42.17 a barrel.
In post-settlement trade, both Brent and WTI pared gains under pressure from a larger-than-expected build in US oil inventories suggested by data from the American Petroleum Institute, a trade group. . Brent retreated to $44.19 by 4:50 p.m. EDT (2050 GMT), while WTI pulled back to $41.64.
Oil markets were already boosted ahead of an Opec member meeting with outside producers in Doha, Qatar, on Sunday, but the comments fueled hopes that oil producers will agree on steps to tackle a supply glut.
Still, some analysts remained skeptical. While the market was being driven higher on a global supply-demand rebalancing, the threat of record-high inventory levels and producers increasing output once prices rebound continued to loom.
"The market seized upon it and it was seen as bullish," said John Kilduff of Again Capital in New York. "As we inch closer to a deal, if there is one, it's obviously bullish for the market. I remain skeptical, however."
Gene McGillian, senior analyst at Tradition Energy, added that Iran's participation in the output freeze would be crucial for a more meaningful discussion regarding supply cuts.
Brent and US crude moved through their 200-day moving averages, which stood at $43.54 for Brent, potentially putting the market on a firmer technical footing.
Industry group the American Petroleum Institute is scheduled to release its report on Tuesday at 4:30 p.m. EDT (2030 GMT). US commercial crude oil inventories likely rose last week, a preliminary Reuters poll showed on Monday. – Reuters
