By Barani Krishnan
NEW YORK (Reuters) – Oil prices hit five-week highs on Monday, gaining 10 percent or more in a three-day rally as speculation intensified over potential producer action to support prices amid a crude glut.
Data from market intelligence firm Genscape estimating a draw of more than 350,000 barrels at the Cushing, Oklahoma delivery point for U.S. crude futures last week added to the bullish sentiment, said traders who saw the data.
Separately, a Reuters poll indicated total U.S. crude inventories may have fallen too last week.
U.S. West Texas Intermediate (WTI) crude
Russian Energy Minister Alexander Novak bolstered hopes on Monday that oil producing nations could take action to stabilize prices.
The market started to rally on Thursday after Saudi energy minister said non-members and members of the Organization of the Petroleum Exporting Countries (OPEC) are to meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria from Sept. 26-28.
“While we see very little possibility of an actualization of curtailed OPEC output, there will likely be enough chatter during the next five to six weeks to deter selling in allowing WTI to gravitate at around the $45 area, at least through the second half of this month,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
Other analysts were skeptical that the rally would continue.
“In our view, a renewed price correction cannot be ruled out if market participants start focusing on the supply side again, for the latest drilling activity figures in the U.S. cast doubts that the oversupply is really being eroded,” Commerzbank analyst Carsten Fritsch said in a note.
There are also doubts that Saudi Arabia and other major OPEC members such as Iran will put aside a market share battle in order to prop up prices.
New York-based crude cargo tracker Clipperdata said exports by OPEC’s big six – Saudi Arabia, Iran, Kuwait, Qatar, Iraq and UAE – total 3.3 million barrels per day (bpd), or nearly 22 percent, more from their 2015 start of 18.5 million bpd.
“It seems prudent to point out the contrast betwixt actions versus words,” said Clipperdata analyst Matt Smith said, referring to OPEC.
On the demand side, the world’s three biggest economies – the United States, China and Japan – all published downbeat economic data between Friday and Monday that could spell erosion in oil demand.
(Additional reporting by Libby George inb LONDON and Henning Gloystein in SINGAPORE; Editing by David Evans and Marguerita Choy)