The oil price jumped above $40 a barrel for the first time this year yesterday, extending its rebound from lows hit in January to almost 50 per cent, as more traders bet that the worst of a 20-month long rout is over the Financial Times reports.
Sentiment in the oil market has improved, as large Opec and non-Opec producing countries prepare to meet to discuss a possible output freeze. Saudi Arabia, Russia, Qatar and Venezuela agreed last month to put production levels on hold – pro- vided that other countries joined them – in the first coordinated action to tackle a global supply glut that has hammered the industry since mid-2014.
“It’s logical for everyone to freeze their production,” Suhail Al Maz- rouei, the UAE energy minister, told reporters in Abu Dhabi yesterday, according to wire services. “It doesn’t make sense for anyone to increase production at the current prices.”
The biggest oil exporters have had their budgets slashed by a near-75 per cent price collapse, which culminated in a 13-year low close to $27 a barrel. But there are signs that the mar- ket could tighten.
Pipeline outages in Iraq and Nigeria have temporarily removed several hundred thousand barrels a day from the market.
US production, which played a large role in creating the glut as it surged between 2010 and 2015, has dropped for six weeks as the price rout finally reduces output at shale fields.
Brent crude, the global bench- mark, rose 3 per cent to $40.11 a barrel, the highest since December.
West Texas Intermediate, the US marker, increased 3.5 per cent to a high of $37.46 a barrel.
Prices have rebounded as much as 48 per cent since hitting $27.10 in January.
Part of the rally has come from financial investors closing out bets on falling oil prices and repositioning for a recovery.
Hedge funds and other money managers increased their bets on a Brent price to a record last week, according to exchange data published yes terday.
On the Intercontinental Exchange the net long position – the difference between bets on rising and falling prices – increased by 22,171 to 342,460 lots for the week to March 1, the highest since records be- gan in 2011. “More and more specula- tive financial investors are jumping on the bandwagon, thereby reinforcing the upward trend,” said analysts at Com- merzbank.
