Oil Reaches 2016 Highs

The price of Oil jumped to a year high on Monday after Saudi Arabia expressed optimism that OPEC will work out a global production deal with other producers by November and Russia added to the market’s strength after commenting that it was ready to join the deal to cut crude output with either a freeze or a cut.

Brent for December increased by $1.21, just over 2% to $53.14 a barrel. It rose as much as 3.5% at one point rebounding from Monday morning losses and reached $53.73, the highest since 9th Oct 2015.

WTI for November settlement jumped $1.54 or 3% to $51.35 a barrel. It touched $51.60, the highest level since 9th June and was just 8 cents away from a 15 month high.

Energy shares led the Standard & Poor’s 500 Index slightly higher yesterday and according to CFTC data shown on Friday, money managers have increased long positions in WTI futures and options to the highest level in more than four months. 

Last month in Algiers, the Organization of the Petroleum Exporting Countries agreed to cut oil output by about 700,000 barrels per day with an aim to bring production to a range of 32.50-33.0 million bpd by next OPEC meeting in Vienna on November 30th. OPEC expects to see similar commitments from non-OPEC producers.

Russia responded to this and said yesterday that a freeze or even a production cut is probably the only proper decision to preserve stability in the global energy market. Russian Energy Minister Aleksandr Novak added that Russia prefers to freeze production and despite Monday’s comments, by Tuesday Novak said that Russia will only consider freezing production.

Ministers from oil producing countries are meeting tomorrow in Istanbul, Turkey, to discuss implementing the Algiers deal. No decision is expected to be taken but it indicates that the group is more serious towards managing the global supply and price stability.

The details of how production will be cut are set to be worked out at the next OPEC meeting in Vienna.

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Reuters: Business News