Crude oil futures rose sharply on Monday amid renewed speculation that major producers including Saudi Arabia and Russia could cooperate to tackle weak prices and rein in oversupply.
Brent crude futures for November delivery were up $1.50 per barrel at $48.33 a barrel at 0812 GMT, after the contract jumped by almost $2 a barrel earlier in the session.
U.S. crude for October delivery was up $1.20 a barrel at $45.64 a barrel, after hitting a session high of $46.00.
Saudi energy minister Khalid al-Falih will make a “significant announcement” at a news conference at 0930 GMT at the G20 summit currently being held in Hangzhou in China.
This comes after Saudi deputy crown prince told Russian President Vladimir Putin on the sidelines of the same summit that cooperation between the two countries would bring benefit to the global oil market.
“Verbal intervention was again needed to trigger a recovery towards $50,” senior ABN Amro economist Hans van Cleef said.
“After all, if prices remain too low ahead of the meeting, there is a risk that at some point Russia and Saudi Arabia actually need to act. That would probably be the last thing they want as long as Iran is raising output.”
Brent rallied to above $50 a barrel in late August, helped by growing talk of a coordinated production freeze, but prices have since fallen as few believe OPEC will act.
Russian Energy Minister Alexander Novak has said that an oil production freeze would be one of the issues discussed by crude producers later this month in Algeria.
Iran, OPEC’s third largest producer, has said it would only cooperate in talks to freeze output if fellow exporters recognised its right to fully regain market share.
Iran is ready to raise its output to 4 million barrels per day in a couple of months depending on market demand, a senior official from the National Iranian Oil Company said.
“Even though there will be discussions in Algeria, there’s no strong feeling that anything will be done, so the supply remains high,” said Tony Nunan, oil risk manager at Japan’s Mitsubishi Corp in Tokyo.
“Even if successful, an OPEC freeze would likely be a short-term positive but a medium-term negative for oil prices,” Morgan Stanley analysts wrote in a note. “If a short-term freeze were implemented, oil prices would rise on the news, but it would do little to correct the near-term oversupply.”