NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher this afternoon after rebounding midsession on a report by Reuters raised hopes the Organization of Petroleum Exporting Countries will agree to reign in oil production next month.
Reuters reported that Iran was sending positive signals that it may support the anticipated coordinated action by OPEC and Russia to stabilize the oil market. Earlier, market speculation that OPEC may not reach a deal to freeze output next month prompted a selloff.
Iran has been raising its output since January when Western nations lifted sanctions imposed in 2011 due to its uranium enrichment program. Tehran's insistence on boosting its supply was a key reason an earlier effort by OPEC to freeze output failed during an April OPEC meeting in Doha, Qatar.
At the time, Saudi Arabia insisted Iran must freeze its output like every other OPEC member. This time, however, key OPEC members including Iran, Saudi Arabia, Qatar, Nigeria and Venezuela have indicated they are ready to speak with one voice on stabilizing the market. Iranian support for a production freeze would suggest Tehran is reaching pre-sanctions production level, said analysts.
"I think there's credibility to that Reuters report because the Iranians need higher oil prices like everybody else," said analyst Phil Flynn at Price Futures Group.
In addition, a Schneider Electric survey of analysts showed domestic U.S. crude oil inventories are expected to have been drawn down during the week-ended Aug. 19 by 2.3 million barrels (bbl), with gasoline supplies falling by 1.7 million bbl and middle distillate stocks posting a 700,000 bbl increase.
The American Petroleum Institute is set to issue its data this afternoon and the Energy Information Administration its report on Wednesday morning.
NYMEX October West Texas Intermediate crude futures contract settled 69 cents higher at $48.10 bbl, reversing off a four-day spot low of $46.59. October Brent contract on the IntercontinentalExchange settled 80 cents higher at $49.96 bbl, reversing off a five-day spot low of $48.48.
NYMEX September ULSD futures settled 1.54 cents higher at $1.5018 gallon and September RBOB futures rallied 1.46 cents to $1.4988 gallon settlement.
Analysts' notes issued by investment banks were largely bearish, with Goldman Sachs saying the market was oversupplied and WTI likely to trade within a $45 to $50 bbl range through mid-2017, and Citigroup expects oil volatility to continue in the near term.
George Orwel can be reached at email@example.com
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.