Oil price tops $50 on talk of supply freeze

Employees work on a drilling rig at an oil field outside the West Siberian city of Nefteyugansk, Russia. (Reuters)

LONDON: Brent crude oil hit a six-week high above $50 a barrel on Thursday as the world’s biggest producers prepared to discuss a possible freeze in production levels.

Brent rose to $50.22 a barrel, up 37 cents on the day and its highest since July 4 by 1330 GMT. US light crude oil was up 65 cents at $47.44.
Benchmark North Sea Brent has risen 20 percent from a low in early August on news the Organization of the Petroleum Exporting Countries and other key exporters will probably revive talks on freezing output levels when they meet in Algeria next month.
Many OPEC members have been hurt badly by a collapse in oil prices over the last two years. While some Gulf oil exporters have very low output costs, other producers such as Iran and Venezuela need oil prices above $100 to balance their budgets.
But freezing production at current levels might not help bolster prices, analysts say.
Saudi Arabia has signalled that it could boost its crude oil supplies in August to a new record, even as it prepares to discuss output levels with other producers.
OPEC members will meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria on Sept. 26-28.
“We remain skeptical that renewed talks of a production freeze by OPEC and other large producers will lead to a deal. Prices are only marginally above where they were when the group met in Doha in April and couldn’t agree to a deal,” ANZ analysts said in a note.
Carsten Fritsch, senior oil and commodities analyst at Germany’s Commerzbank, said the crude oil market appeared to be near the top of its recent range.
The end of the northern hemisphere summer season often sees a dip in oil demand and could coincide this year with much higher production from Saudi Arabia.
“The latest news from Saudi Arabia is not price supportive at all,” Fritsch said.
“This is a double whammy for the oil market. A test of the lows of early August is quite possible.”
Analysts at Citi also warned of the risks of a price rally based largely on potential future talks on freezing crude output levels given that similar meetings earlier this year failed to produce any such agreement.
“OPEC cooperation hopes should be treated with caution, as this is shaky ground to base a bull rally on,” the bank said.