NEW YORK (DTN) -- New York Mercantile Exchange oil futures rallied at the start of regular trade Monday morning as the dollar index tumbled to a better than one-week low while positive comments from Iraq raised expectation that members of the Organization of Petroleum Exporting Countries are on track to agree to a production cut when they meet Wednesday (11/30) for their biannual summit in Vienna.
NYMEX oil futures reversed higher after Iraqi oil minister Jabar Ali al-Luaibi said he was "optimistic" a final agreement by OPEC to cut their production would be reached Wednesday, and added Iraq would cooperate with other OPEC members. This is a turnaround for Iraq after recently seeking an exemption from the proposed pact.
Iraq and Iran have been the holdouts to a deal, with Iraq saying it needs more revenue to fight the Islamic State, so it should either be exempted or allocated a higher production quota than what was being proposed. For its part, Iran has for long been opposed to participating in any plan that stops it from recapturing the market-share it had before the imposition of sanctions in 2012, which were lifted in January.
Despite Iraq's positive comments this morning, a potential OPEC deal still faces challenges. An Iranian news agency published an editorial Sunday accusing Saudi Arabia of declaring a new war on oil prices. The tone of that editorial was a reversal from September when the same news agency was upbeat in its coverage of OPEC's informal deal in Algiers. The analysts said this signals the rift between Iran and Riyadh could prevent a deal this week.
Tensions also grew over the weekend between OPEC and Russia, a non-OPEC producer, in part because OPEC wants Russia, the world's top producer with record output of 11.32 million bpd in October, to cut its production rather than freezing output as Moscow has pledged.
Saudi Arabia failed to attend a meeting with Russia over the weekend. Today, Algerian and Venezuelan oil ministers are scheduled to travel to Moscow in a last-ditch effort to persuade Russia to take part in cuts instead of merely freezing output.
"The Saudis who thought they had a deal with Russia seems to now feel the Russians are failing to do their part," said analyst Phil Flynn at Price Futures. "The Russians probably are backing off a bit because they are looking at the signs that Iraq and Iran are getting, and they don't want to do any more of the heavy lifting."
Saudi energy minister Khalid al-Falih said over the weekend that the oil market will rebalance on its own and a production cut may not be needed as rising demand in the United States may put the oil market in balance soon. That contrasted with his previous statements in which he had said Riyadh was keen on a deal.
In early trade, NYMEX January West Texas Intermediate crude futures rallied $1.03 to $47.09 bbl. The January Brent crude oil futures contract on the ICE futures complex added $1.02 $48.26 bbl.
The NYMEX December ULSD futures contract advanced 4.05cts to $1.5105 gallon. The December RBOB futures contract rallied 3.53cts to $1.4080 gallon.
Domestically, the Energy Information Administration last week reported a 1.3 million bbl crude stock draw, a 2.7 million bbl gasoline stock build and a 326,000 bbl rise for distillate fuel supplies for the week-ended Nov. 18.
George Orwel can be reached at firstname.lastname@example.org
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