Weekly US crude inventories fall by 2.5 million barrels

After holding output steady in the first half, the Saudis started pumping more from June onwards, and further increases in production would mean attempting to out-produce the world’s top oil producer, Russia, which is not an OPEC member.

“The only way for Saudi Arabia to maintain oil exports and avoid loss of market share in the summer is to increase production”, Anas Alhajji, an independent oil analyst in Houston, said by phone Thursday.

Prices have rallied almost 20 percent since early August on talks of an OPEC move to support prices, mirroring gains earlier in the year when the cartel had raised the prospect of curbing supply.

The rapid rise puts oil, technically, in a bull market.

Oil is set for its biggest weekly gain since March after entering a bull market amid speculation that major producers may act to freeze output and as USA crude and fuel stockpiles decline.

Brent for October settlement advanced US$1.04, or 2.1 per cent, to close at US$50.89 a barrel on the London-based ICE Futures Europe exchange.

Worldwide benchmark Brent crude oil futures were trading at $50.80 a barrel at 12.56am GMT, down 9c from their last close.

Brent on Thursday rose above $50 a barrel for the first time since June 24 in a sharp bull-run during which prices have soared more than 20% since early August.

A weaker US dollar, the currency that the oil industry uses, also may have contributed to the rise.

The jump came reflected renewed confidence on possible moves by the OPEC to freeze production as member states prepare to meet on the sidelines of the International Energy Forum in Algeria in late September.

Yet analysts have concerns that such a plan would succeed, especially considering Iran’s reluctance to cooperate. Also, if OPEC moves as expected, and offers no change in output decisions in September, even more downside will result.

The market is also watching rising USA rig counts, which have risen by 80 since a low in early June to 396 in the week ending August 12.

Talks on a production freeze deal between Russia, OPEC, and other oil producers failed in April, after Saudi Arabia said Iran should also be included in the negotiations.

Oil prices have rallied from lows of under $28 per barrel in January to trade above the $50 per barrel mark in June, spurred by a string of worldwide oil production outages in the second quarter that offered temporary respite from the global glut.