Oil prices rebound late on Tuesday, after a drop at early trading with Brent hitting four-month highs on a rally inspired by OPEC plans to tighten output.
Earlier, oil prices had dropped due to a surging dollar, which weighed on greenback-denominated commodities.
Weaker equity prices on Wall Street also limited oil’s run higher.
Brent crude was up 13 cents at 51.02 dollars a barrel at early trading but rose to 51.37 dollars as the session peak its highest since June 10.
U.S. West Texas Intermediate (WTI) crude rose to 48.78 dollars a barrel but the session high for WTI was 49.13 dollars, its highest since July 5.
Stig Rasmussen, a senior proprietary trader at Danske Commodities in Aarhus, Denmark, said “the OPEC deal looks more and more like hot air but oils still very technically driven.
“For Brent, the next target is 52.86 dollars. I imagine at that point, shale oil companies will be hedging bigger volumes for 1-2 years ahead.”
Nigeria, Libya supply boost
Overall production from the Organization of Petroleum Exporting Countries increased by 170,000 barrels a day from the previous month to 33.75 million barrels a day, the survey of analysts, oil companies and ship-tracking data showed. Nigeria and Libya added a combined 190,000 barrels a day which compensated for a drop in output from Saudi Arabia and Angola.
Production from Nigeria and Libya is returning after internal unrest crippled the countries’ oil infrastructure. Together with Iran, they will likely be exempt from a preliminary deal agreed by OPEC in Algiers Sept. 28 to cut production for the first time in eight years in an effort to revive prices. West Texas Intermediate crude capped the biggest monthly gain since April following the news.
Libya will reach 600,000 barrels a day by the end of this month, according to Ibrahim Al-Awami, head of Libya’s National Oil Corp.’s oil measurement department. The country with Africa’s largest crude reserves produced an average of 340,000 barrels a day in September, up from 260,000 in August.
Nigeria increased production by 7.9 percent to 1.5 million barrels a day. The returning barrels came as a delivery halt was lifted on Royal Dutch Shell’s Bonny Light stream early last month. Bonny Light was one of four Nigerian grades under force majeure — a legal clause that allows companies to halt shipments without breaching contracts — for reasons including attacks by militants and saboteurs who seek to thwart export-pipeline operations absent a share of the revenues.
Iran’s production rose by 10,000 barrels a day to 3.63 million barrels a day. The rapid increase in output that followed the easing of sanctions in January has slowed in recent months, as production has neared pre-sanctions levels.
Oil output in Saudi Arabia — the world’s biggest crude exporter — dropped by 60,000 barrels a day as temperatures retreated from mid-summer highs, triggering a drop in domestic air conditioning usage. Angolan production dipped 40,000 barrels a day.
OPEC agreed to limit output to a range of 32.5 to 33 million barrels a day, reversing a two-year-old policy to pump at will. The group will reveal more details about this agreement, including each country’s targets, when it meets at the end of November in Vienna.