Oil Jumps to One-Month High as OPEC Ready to Talk to Producers

31 Aug 2015 | Author: | No comments yet »

Brent crude tumbles as fundamentals back in focus.

Oil prices surged more than 5 per cent Monday, continuing a three-day rally that has erased August’s price declines, after U.S. oil production data showed output falling and OPEC said it would talk with other producers about low prices.

Oil rose to a one-month high after OPEC said it’s ready to talk to other producers to achieve ‘fair prices’ and the U.S. government reduced its crude output estimates. Crude futures rebounded after retreating early Monday, spiking as new U.S. government figures indicated production was lower than initially reported for the first half of the year. The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s supply, is willing to talk “but this has to be on a level playing field,” according to the OPEC Bulletin, the group’s monthly publication.

Brent crude fell more than 3 per cent in early hours of New York trade-to-trade at $48.54 per barrel, and WTI crude also fell 2.79 per cent to be at $43.96. “A speculative washout of overextended short positions caused the knee jerk reaction on Thursday and Friday,” Ole Hansen, head of commodity strategy, Saxo Bank said. U.S. domestic crude oil production peaked at just above 9.6 million barrels per day (bpd) in April before falling by more than 300,000 bpd over the following two months, Energy Information Administration (EIA) data showed on Monday. . It gained 10 per cent last week. “Fundamentals in terms of the imbalance between supply and demand are most likely going to get worse before improving the near-term.

Since November, OPEC countries led by Saudi Arabia have kept production high to maintain market share, even as prices have plummeted. “There’s extreme volatility, with London out and the market is rallying on the OPEC headline,” said Scott Shelton, commodities specialist at ICAP in Durham, North Carolina, referring to a bank holiday in Britain. On Monday, stocks in Europe and Asia looked set for their worst monthly losses in at least three years, with investors still concerned about growth in China and the prospect of higher US interest rates.

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