Saudi Arabia will be willing to listen to other producers and what they have to offer when it comes to an output freeze, the kingdom’s Energy Minister Khalid Al-Falih said in an Aug. 25 interview in Los Angeles. Oil suppliers want a deal to manage output, the Organization of Petroleum Exporting Countries’ Secretary General Mohammed Barkindo told Arabic-language newspaper Al-Hayat.
Speculators slashed their short position in West Texas Intermediate by 66,247 futures and options during the week ended Aug. 23, the most in data going back to 2006, according to the Commodity Futures Trading Commission. Bets on rising prices jumped to the highest in more than a year.
Futures rose 3.3% to $48.10/bbl in the report week. WTI, the U.S. benchmark, entered a bull market Aug. 18, less than three weeks after tumbling into a bear market. Prices were down 1.4% at $46.98 as of 8:15 a.m. on Monday.
OPEC’s Aug. 8 announcement that it would hold “informal talks” in Algiers spurred a rebound in prices. The International Energy Forum, comprising 73 countries that account for about 90% of the global supply and demand for oil and natural gas, will meet in the Algerian capital on Sept. 26-28.
Another reason for the rally is that global oil oversupply is finally dissipating, according to banks from Citigroup Inc. to Bank of America Merrill Lynch. A narrowing discount on immediate supplies of Brent crude, the benchmark grade for half the world’s supply, is the “clearest indicator” that the two-year glut is fading, Credit Suisse Group AG said.
“There’s ongoing faith that the oil market globally is rebalancing,” Evans said.
Money managers’ short position in WTI dropped to 96,985 futures and options, the least in two months. Longs increased 5.6%, while net-longs almost tripled over the past three weeks.
Some analysts remain unconvinced that OPEC nations will be able to reach an agreement. In April, Saudi Arabia’s demands that Iran be part of any deal to limit output scuppered a proposed deal between OPEC and other producing countries.
“This is a lot of talk,” said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “There are too many issues in the Arabian Gulf region for an agreement to take place.”
