Oil prices register surge ahead of OPEC meeting

Oil prices rose modestly in Asia on Monday ahead of a producers’ meeting this week that might agree to cap supplies.

But analysts warned the wellspring of optimism should be tempered by experience of two years of gluts and disagreement among members of the Organisation of Petroleum Exporting Countries (OPEC).

OPEC and Russia are slated to begin meeting later today on the sidelines of the International Energy Forum in Algiers, looking for ways to stabilise prices that have been depressed since 2014.

Pre-forum talks last week between OPEC kingpin Saudi Arabia and member Iran were bleak, with neither willing to commit to freezing production, sending prices plunging more than 3.0 per cent on Friday.

However, both major contracts rebounded today after Algeria’s energy minister said all options were still on the table, said OANDA market analyst Jeffrey Halley.

“With OPEC meeting on the sidelines of International Energy Forum for the next three days, and with the first (US) presidential debate happening tomorrow morning Asia time, expect oil to move on comments that range from hope to reality,” he said.

At about 0845 IST, US benchmark West Texas Intermediate for November delivery was up 31 cents to USD 44.79 while Brent crude gained 37 cents to USD 46.26.

Despite the positivity, fears remain an agreement cannot be reached, given how previous attempts in April were scuppered by Iran, which had just emerged from years of Western-imposed nuclear-linked sanctions.

“Our base case assumption is no freeze; yet, members are likely to make statements highlighting that they are closely watching market developments and will host a subsequent exceptional meeting if deemed necessary,” British bank Barclays said in a research note.

“Thus, we recommend paying less attention to Algiers and more attention to a naturally tightening oil market balance that precludes the group from having to make any difficult decisions.”

Oil prices have been hammered by a stubborn supply glut since late 2014 that has seen supply far outweigh demand, sending both contracts to 13-year lows earlier this year.