NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled off highs this afternoon amid doubts the Organization of Petroleum Exporting Countries and Russia will meet next month to discuss cutting production.
The oil futures complex had rallied to three-week highs for NYMEX West Texas Intermediate, ULSD and Brent futures on the IntercontinentalExchange while NYMEX RBOB climbed to a two-week high, after Russian oil minister Alexander Novak said Russia and OPEC members will meet in February to discuss a prior proposal by Saudi Arabia to cut output by 5%. He said the talks may include all producing nations, including Saudi Arabia.
But the comments were dismissed after several OPEC delegates came out saying no meeting with Russia has been scheduled. The delegates said the 5% output cut proposal attributed to Saudi Arabia was actually made during a prior OPEC meeting, and is therefore not a legitimate figure to be relied on.
Both Russia and Saudi Arabia are the world's top producers at more than 10 million bpd each, although Saudi Arabia is the top exporter, and so a deal between them would be crucial to rebalancing the market.
The oil market, which had increasingly grown confident about the proposed meeting, quickly gave up some of the early gains. Still, the market held on to gains in part because of the idea that cuts are being considered despite the conflicting reports, and partly because of a technically-driven short-covering. Today marks the first three-day rallying streak for 2016.
"I think the Russia-OPEC headlines is just talking the market up, but it did force the shorts to cover," said Houston-based analyst Andy Lipow.
At settlement, NYMEX March WTI crude futures climbed 92cts to $33.22 bbl, off a three-week spot high of $34.82. ICE March Brent oil futures advanced 79cts to $33.89 bbl, off a three-week high of $35.84 on the spot continuation chart.
In products trade, the NYMEX February ULSD futures contract edged 0.57cts up to $1.0309 gallon, off a three-week spot high of $1.0956. February RBOB futures contract rose 3.33cts to $1.0790 gallon, off a two-week spot high of $1.1309.
On Wall Street, stock indices were higher ahead of their close, tracking oil price gains and also because of a weaker dollar. But the main story today was all about Russia and OPEC.
Oil prices have been declined for more than a year as demand struggled to keep pace with high global production and as stockpiles of crude oil and refined products increased. Nigeria and Venezuela have been calling for output cuts but Saudi Arabia has dismissed that idea, saying OPEC would only act if non-OPEC producers responded in kind.
So, the prospect for cooperation between OPEC and Russia grew closer when Russia appeared to support production cuts. However, a few analysts were skeptical and a new report by Barclays Capital argued that the Russians and Saudis are trying to raise false hope about the likelihood of a production cut by OPEC and non-OPEC.
"Talk of an OPEC cut is likely no more than an attempt to shift market sentiment," said the Barclays Capital report. "Given the short positioning, this news has spurred positive price action this week. [But] we remain highly skeptical that such a meeting will result in credible cuts in supply. We do not expect that it will change the physical market imbalance."
Wednesday's data from the Energy Information Administration showed domestic crude supplies at record highs, but the Federal Reserve tried to reassure the market by not raising interest rates Wednesday. The market will be looking forward the U.S. Gross Domestic Product data due out Friday.
George Orwel can be reached at email@example.com,
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.