Oil Prices Dip As Traders Cash In On Two-Week Price Rally

Oil prices struggled for direction in European trade on Tuesday, as investors paused for breath following an impressive three-day rally which boosted prices by almost 10% amid indications major oil producers are reconsidering a collective production freeze in a bid to boost the market.

The continued recovery in crude oil has been partly driven by speculation that major oil producers may finally begin to cooperate to help support crude prices, especially after recent comments by the Saudi energy minister alluded to this possible intention.

On Friday, Baker Hughes said the number of active US oil rigs soared by 17 last week, mostly in the Permian Basin in Texas.

Oil prices eased in Asia trade on Tuesday but held above $45 a barrel as the market weighed the possibility of major producers reaching an agreement at a meeting next month to freeze output.

Just back in July, a record of 10.67 million barrels a day was reached by Saudi Arabia while OPEC’s overall combined production all in all was a total of 33.39 million barrels a day last July.

“On oil production cuts by OPEC, optimism on my part is quite sparse”, he said.

Take note that Iran has said that production levels are yet not met, which basically means no cooperation. These remarks were made after last week’s signal from Saudi Arabia to consider the measure of lifting prices following oil futures’ selloff.

U.S. West Texas Intermediate (WTI) crude gained $1.06, or 2.4%, to $45.55, after rallying earlier to $45.61, a peak since July 21.

Novak said that a complete return of market stability is only likely in 2017.

Oil prices extended gains after Al Falih’s remarks on Thursday, which indicated that Saudi Arabia is anxious that oil prices could fall towards $40 per barrel or lower due to oversupply.

Analysts expect prices to fluctuate ahead of the September informal meeting in Algeria involving members and non-members of the Organization of the Petroleum Exporting Countries (OPEC).

Oil prices also got a boost as the dollar weakened on foreign exchange markets, with the euro rising to US$1.1279 from US$1.1183 between Monday and Tuesday.

Russian Federation sees no signals that Iran will change its position on a production cap and agree to an output freeze, news service Interfax reported, citing an unidentified diplomatic source close to the talks.

Oil turned higher on Tuesday as the United States dollar weakened sharply, with focus on fresh inventory data, while hopes over soon action from OPEC continue to boost prices. The policy has led to the dangerously low prices we are seeing today, and it’s finally looking like OPEC member nations may not be able to sustain these production levels for much longer.