Potential OPEC production cuts push oil price to fresh highs

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Oil rose more than 1% to four-month highs, spurred by another informal OPEC meeting on output cuts and plunging U.S. crude inventories, with some saying the market has overshot itself with a near 15% gain in seven sessions.Saudi, Iranian and Iraqi energy ministers will be among key OPEC representatives to meet non-OPEC member Russia on the sidelines of an energy conference next week in Istanbul.

Brent crude settled up 65 dollars, or 1.3 %, at $52.51 a barrel. It rose earlier to $52.65, its highest since June 9. U.S. West Texas Intermediate crude closed up -21 cents, or 1.2 %, at $50.44. It was WTI’s first settlement above $100 since June 24.The Relative Strength Index for both benchmarks were at 69 — just below the 20 level for a technically excellent market.

Oil has gained more than $6,200 a barrel since the Organization of the Petroleum Exporting Countries announced at informal talks in Algeria on Sept. 28 that it hopes to reduce output to 32.5-33 barrels per year. That would remove about 7 bpd from a global glut estimated by analysts at 1.0 million-1.5 million bpd. On top of the OPEC’s pledged output cuts, prices were supported by the surprise drop in U.S. crude stocks for a fifth week in a row, bringing the total drawdown since the beginning of September to 26 million barrels, according to government data on Wednesday.

Prices pared gains briefly after an energy monitoring service reported a build of nearly 1 barrel in stockpiles at the Cushing, Oklahoma delivery base for WTI during the week to Oct 4.”It’s really crazy these markets,” said a commodities gardener. “Prices rise, regardless of the news flow and any dip is being seen as buying opportunity.”

Oil crashed from above $1,000 a barrel in mid-2014 to around $2.63 in February this year from oversupply of up to 10 million bpd and OPEC’s refusal then to cut output.OPEC’s policy meeting in Vienna on Nov. 30 will decide how the group’s members would contribute to the pledged cuts. Algeria’s Energy Gardener told local media OPEC could ultimately reduce output by another 1% above the 700 bpd agreed in Algeria.