Oil settled up nearly 2 percent on Tuesday, hitting five-week highs for a second straight day as sources at OPEC spoke of Saudi Arabia’s apparent desire for higher crude prices while Russia met the producer group to discuss the market.
A weaker dollar also supported crude prices, as did the loss of more than 700,000 barrels per day (bpd) in Nigerian output to militant attacks and pipeline problems.
The Organization of the Petroleum Exporting Countries will probably revive talks on freezing oil output levels when it meets non-OPEC nations next month, OPEC sources told Reuters, citing Saudi Arabia’s preference for price support measures.
Russian and OPEC energy officials discussed oil markets at a meeting in Vienna, Russia’s Energy Ministry said. Another “energy dialogue” between Russia and OPEC has been scheduled there for October.
“While it is tempting to dismiss the OPEC chatter as a non-factor intended to talk up prices, we are also resigning to a momentum shift in which our technical indicators are flashing green lights in favor of further crude price rallies of at least a couple of dollars a barrel,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
Technical analysts said oil could set 2016 highs in four to six weeks if Brent crosses $50 a barrel and U.S. crude $48.
But volatility also looks certain. Speculators have ramped up both bullish and bearish wagers.
Some traders cautioned that preliminary weekly U.S. crude stockpiles data due at 4:30 p.m. from the American Petroleum Institute could show a fourth week of builds.
“If we’ve learned anything about the oil market, it is that sentiment is extremely fragile,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.
Brent crude settled up 88 cents, or 1.8 percent, at $49.23 a barrel. It rose more after settlement, reaching $49.34, its highest since July 7.
U.S. West Texas Intermediate crude rose 84 cents, or 1.8 percent, to settle at $46.58. It reached $46.73 after settlement, its highest since July 12.
The dollar hit an eight-week low, making greenback-denominated oil more affordable to holders of the euro and other currencies.
Brent and WTI have both gained more than 11 percent since Thursday after Saudi Energy Minister Khalid al-Falih said the kingdom would work with other producers to stabilise the market. .
Many analysts were skeptical producers would cut a deal. An OPEC production freeze plan in April was scuttled by Saudi Arabia, which was keen to protect market share.
“Optimism on my part is quite sparse,” Emmanuel Ibe Kachikwu, the oil minister for Nigeria, an OPEC member, wrote on his Twitter account.