Oil Set for 3rd Weekly Gain as Producers Plan to Meet on Freeze

Oil headed for the longest run of weekly gains since May amid signs of lower output in the U.S. and OPEC, while producers prepared to renew talks on an agreement to freeze production.

Futures were little changed in New York on Friday, taking gains over the last three weeks to about 17 percent. U.S. crude production declined for a sixth week in the period to Feb. 26, while supplies from the Organization of Petroleum Exporting Countries fell in February because of pipeline disruptions in Iraq. OPEC members and Russia may meet to discuss capping output later this month, Nigeria’s petroleum minister said.

Oil is still down about 6 percent this year on speculation a global glut will be prolonged amid brimming U.S. stockpiles and the outlook for increased exports from Iran after the removal of sanctions. Saudi Arabia, Russia, Qatar and Venezuela agreed on Feb. 16 in Doha that they would freeze output if other producers followed suit in an effort to tackle the oversupply.

“Oil’s strength can be attributed to signs of falling production, both in the U.S. and OPEC,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. Plus there are “continued efforts to get more countries signed up to the Doha accord on freezing production, and also signs that demand is picking up,” he said.

West Texas Intermediate for April delivery dropped as much as 17 cents to $34.40 a barrel on the New York Mercantile Exchange, and traded at $34.51 at 9:47 a.m. London time. The contract slid 9 cents to $34.57 on Thursday. WTI is up 5.7 percent this week.

Freeze Talks

Brent for May settlement fell 0.4 percent to $36.94 a barrel on the London-based ICE Futures Europe exchange. Prices are up 5.3 percent this week. The European global crude was at a premium of 65 cents to WTI for May.

While Russia confirmed its readiness to take part in the freeze talks, the time and date of the meeting is still being discussed, according to a statement on the website of the nation’s Energy Ministry. Nigeria’s Kachikwu didn’t specify whether Iran would attend the planned discussions.

There will be a “dramatic price movement” when the meeting takes place on March 20, Nigerian Minister of State for Petroleum Resources Emmanuel Ibe Kachikwu said at a conference in Abuja, Nigeria’s capital, on Thursday. The production cap will help to balance the market and trigger a price rebound in the second half, said Daniel Yergin, vice chairman of consulting group IHS Inc.

Oil production and stockpiles remain elevated:

“Output from OPEC fell by 79,000 barrels a day to 33.06 million a day in February. Saudi output was unchanged while Iran pumped an additional 140,000 barrels a day.

“U.S. crude stockpiles expanded by 10.4 million barrels last week to 518 million barrels, the highest level since 1930, according to data from the EIA.

Source: Bloomberg