Crude Oil Rises Amid Speculation Global Crude Glut to Decline

The Impact From Collapsing Oil Prices
  • Speculators raise net-long positions in WTI by 17% over week
  • Saudi Aramco sees oil rising as demand catches up with supply

Oil climbed amid speculation that the global crude glut will decline as U.S. production slips and central bank policies stimulate demand.

Futures rose 1.2 percent in New York. Oil capped a fifth-straight weekly gain on Friday as government data showed U.S. crude output fell to the lowest level since November 2014 and the Federal Reserve scaled back expectations for the pace of U.S. interest-rate gains. About 15 or 16 countries will attend talks about a possible oil production freeze in Doha on April 17, OPEC Secretary General Abdalla El-Badri said at a press conference in Vienna on Monday.

"Inventories will come down and prices will rise," said Jay Hatfield, president of Infrastructure Cap Advisors LLC, a New York-based hedge fund. "It’s just a matter of time."

Oil has surged more than 50 percent since touching a 12-year low last month. Prices climbed after an accord reached on Feb. 16 between OPEC members Saudi Arabia, Venezuela, Qatar and non-member Russia to cap production at January levels. Iranian Oil Minister Bijan Zanganeh has dismissed the proposal as “ridiculous,” given the nation’s plans to boost exports after the lifting of international sanctions.

West Texas Intermediate futures for April delivery, which expired Monday, rose 47 cents to settle at $39.91 a barrel on the New York Mercantile Exchange. The more-active May futures advanced 38 cents, or 0.9 percent, to $41.52.

Bullish Wagers

Brent for May settlement rose 34 cents, or 0.8 percent, to $41.54 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a 2-cent premium to May WTI.

Hedge funds and other speculators increased their net-long position in WTI futures and options by 17 percent to the highest level since June in the week ended March 15, according to Commodity Futures Trading Commission data. Money managers increased their bullish stance on Brent crude to the highest in at least five years. Funds boosted net-longs in Brent by 15,122 contracts to 348,082 in the week to March 15, according to data published Monday by ICE Futures Europe.

"The market is being guided by traders who believe that a rebalancing will take place this year," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. "Positive economic news, a further U.S. production decline or an agreement to freeze output could add another leg to the rally."  

Shrinking Gap

Oil prices will increase by the end of this year but won’t rebound to levels reached in 2013 and 2014, according to Amin H. Nasser, president and chief executive officer of Saudi Arabian Oil Co. Prices will gain as “the gap between supply and demand in the oil market is shrinking,” Nasser said at an event in Beijing on Monday.

All members of the Organization of Petroleum Exporting Countries have been invited; not all will attend, El-Badri said. The producer group expects oil prices will rebound to a “moderate” level even if Iran doesn’t take part in the agreement to freeze output.

"We will see who will reply and who will not reply, but I hope it will be a successful meeting,” El-Badri said at the organization’s headquarters in Vienna. Iran has some “conditions” related to its own production, and it’s up to that nation whether it participates in the accord, or even opts to join in at a later date, he said.

Output-freeze news, U.S. rig count :

  • Ecuador will propose a cut to output for all producers except Iran at the April 17 meeting, President Rafael Correa told reporters.
  • Libya got official invitation from Qatar Energy Ministry to attend the Doha meeting, says person with knowledge of matter.
  • Drillers put one oil rig back to work last week, increasing the total to 387, according to data from Baker Hughes Inc.
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