Oil up nearly 3 percent on OPEC output speculation as glut grows

NEW YORK (Reuters) - Oil prices settled up nearly 3 percent on Monday amid renewed speculation that OPEC would try to restrain output, easing oversupply worries that pressured the market to three-month lows last week.

A worker walks at Nahr Bin Umar oil field, north of Basra, Iraq December 21, 2015. REUTERS/Essam Al-Sudani

The Wall Street Journal reported last week that OPEC countries such as Venezuela, Ecuador and Kuwait want to take another stab at cooperation between the 14-nation Organization of the Petroleum Exporting Countries and non-members such as Russia.

The last such initiative failed in April after Saudi Arabia backed out of talks in Doha, Qatar, citing Iran’s refusal to join in a so-called production freeze.

Qatar’s Energy Minister and OPEC President Mohammad bin Saleh al-Sada hinted at overtures of cooperation in a statement on Monday. OPEC members are to have an informal meeting on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria from Sept. 26-28.

The energy minister of Russia, the world’s biggest oil producer, said crude prices were not at levels that warranted intervention, but he remained open to negotiations with OPEC.

“It would appear that OPEC calls for restraint would be inevitable,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates, citing concerns over rising numbers of U.S. oil rigs and weakening energy demand.

The U.S. oil rig count rose last week for a sixth week in a row. In China, fuel exports increased more than 50 percent from a year earlier to a monthly record 4.57 million tonnes, adding to a global glut.

U.S. West Texas Intermediate (WTI) crude settled up $1.22, or 2.9 percent, at $43.02 per barrel. WTI hit April lows beneath $40 a barrel last week.

Brent crude rose $1.12, or 2.5 percent, to settle at$45.39.

Some fund managers were pessimistic the OPEC-fueled rally would last. Crude prices rallied nearly 4 percent at the session peak only to pare gains toward the close. They gave up more gains in post-settlement trade after news that the Louisiana Offshore Oil Port will have an additional 2.5 million barrels in oil capacity by April 2017.

“Until proven otherwise, this is still a correction in a bear market,” said Matthew Tuttle, chief executive at Tuttle Tactical Management in Riverside, Connecticut.

“You can have massive up moves like this, and if you can trade it, great. But if you’re looking at another run up to $50 and beyond, I’m not ready to go there. I think we still see under $35 a barrel before we get to $50.”

Hedge funds cut their bullish exposure to Brent to the smallest level since January while paring positive bets on WTI to the least since February, data on Friday showed.

Market intelligence firm Genscape reported a build of more than 307,000 barrels at the Cushing, Oklahoma delivery hub for WTI futures in the week to Aug. 5, traders said, even as analysts forecast a total U.S. crude inventory drop of 1 million barrels.

Additional reporting by Henning Gloystein in Singapore; Editing by Marguerita Choy and Paul Simao