Oil is leaping on reports OPEC is considering a production freeze

Under the freeze, countries would have agreed to limit their production to certain levels in a bid to raise oil prices by constricting the amount of crude on the market. Industries that are heavily reliant on oil as an input can expect their costs to fall dramatically, allowing them to reduce their prices and become more competitive.

The price of oil has remained stubbornly low over the last couple of years, with a lack of demand and oversupply suppressing the commodity’s value.

United States benchmark West Texas Intermediate (WTI) gained 11 cents to $43.13 compared with Monday’s close.

USA stock indexes edged higher in early trading Tuesday, following gains in global stock markets as slack Chinese consumer price figures stoked expectations of more stimulus. “These are more of an outcome resulting from weaker refinery margins, inventory overhang – particularly of product stocks – timing of Brexit and its impact on the financial futures markets, including that of crude oil”.

Futures have wavered for the last several sessions around the low $40-a-barrel mark after last week’s rebound from bear-market lows.

Crude oil for September delivery on the New York Mercantile Exchange tacked on 28 cents, or 0.65%, to trade at $43.30 a barrel by 13:37GMT, or 9:37AM ET. Brent futures were trading at $44.42 per barrel, up 15 cents, or 0.34 percent.

Russia, which is not an OPEC member but is the world’s top oil producer, was quick to dismiss the prospects for such talks.

OPEC countries have considered an output freeze multiple times over the past year, but have failed to reach a consensus each time, including the latest attempt in June.

Brent crude rose $1.05, or 2.4 per cent, to $45.32.

“OPEC members including Venezuela, Ecuador and Kuwait are said to be behind this latest reincarnation. While a deal is highly unlikely to eventuate, the fact that it is even being mentioned shows how much difficulty the past month’s renewed sell-off was causing many struggling OPEC members”, Angus Nicholson, a market analyst at IG in Melbourne, Australia, said in a daily commentary.

Some OPEC members said they believe they could pass a freeze deal as early as the week of September 26, when oil producers meet for the International Energy Forum in Algeria.

London-traded Brent futures are down nearly 15% since peaking at $52.80 in early June, as prospects of increased exports from Middle Eastern and North African producers, such as Iraq, Nigeria and Libya, added to concerns that a glut of oil products will cut demand for crude by refiners.