Published: Sun, August 21, 2016
Economy | By Melissa Porter

Oil holds onto gains as investors hope for OPEC action

Oil holds onto gains as investors hope for OPEC action

"Brent has $50 per barrel for the first time since early July, finding support from a weaker United States dollar and an unexpectedly marked decline in USA crude oil and gasoline stocks", said Commerzbank analyst Carsten Fritsch.

Futures climbed 3.1 per cent in NY and Brent closed above US$50 (RM199.62) a barrel in London for the first time since July 4.

However, analysts warned the rally was overblown, especially since planned talks between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers like Russian Federation to rein in on ballooning overproduction were unlikely to lead to a reduced supply overhang.

The EIA said on Wednesday that US commercial crude inventories posted a 2.5 million barrel draw during the week of August 12.

The price of oil rose above $51 per barrel in Friday's trading in global markets reaching the highest level since in multiple months.

The rally has also been driven by short covering by speculators including hedge funds and other money managers, who had amassed record short positions.

OPEC members will meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria on September 26-28. A deal to cap production was proposed in February but a meeting in April ended with no accord.

West Texas Intermediate crude oil futures were essentially unchanged in afternoon trade on Friday, as traders finally began to take a more realistic approach on the prospective for an output freeze by major producers next month. "The overhang is still very much there", said Alex Poon, vice president of a Hong Kong-based brokerage firm. USA crude inventories dropped the most in five weeks through August 12, while fuel stockpiles slid a third week, Energy Information Administration data showed Wednesday.

"We are continuing the bullish trend this week", Larry said. It also revealed Saudi exported a large chuck of the oil it produced, rather than using it domestically.

"Seeing gasoline stocks in the USA decline solidly three weeks in a row has taken out some of the bearish pressure in the market and on top of that you have these OPEC freeze discussions", said Bjarne Schieldrop, chief commodities analyst at SEB Markets. Against a basket of currencies, the dollar fell 0.6 percent and hit an 8-week low versus the Swiss franc.

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