Oil rose further above $30 a barrel on Jan. 26, lifted by hopes that OPEC and non-OPEC producers may be edging closer to a deal to tackle one of the biggest supply gluts in decades.
OPEC is making renewed calls for rival producers to cut supply alongside its members, but Russia, seen as key to any deal, has so far refused to cooperate.
Iraqi Oil Minister Adel Abdel Mahdi said on Jan. 26 he saw "some flexibility" for a deal.
Such an idea has been repeatedly mooted and dismissed for over a year.
Brent crude was up 37 cents to $30.87 a barrel by 6:14 a.m. CST (12:14 GMT), rebounding from an earlier decline. It reached $27.10, its lowest since November 2003, on Jan. 20. U.S. crude was up 34 cents at $30.68.
"Without a production agreement, fundamentals point to lower numbers," said David Hufton of oil brokers PVM. "With one, oil becomes a $40-to-$60-a-barrel market."
Demand concerns limited the rally. China's annual rail freight volume fell 11.9% in 2015 versus a drop of 3.9% in 2014, adding to worries about contracting economic activity in the second-largest oil consumer.
"Fears of a sharp slowdown in economic growth, particularly in China, are dragging down global stock markets from arguably overheated levels," analysts at Energy Aspects said in a report. "This is weighing on other risky assets, including oil."
Despite a price collapse and spending cutbacks across much of the industry, major OPEC producers are sticking to investment plans and some intend to boost supply.
The risk of prices staying low for a longer time is not deterring Kuwait from investing in energy projects, the head of Kuwait Petroleum Corp said on Tuesday, echoing similar comments from the chairman of Saudi Arabia's state oil company.
Iraq may further boost output this year, a senior Iraqi oil official, who asked not to be identified, said on Jan. 25. Production hit a record in December.
Investors are now watching the U.S. Federal Reserve policy meeting starting later in the day, the first since the central bank raised interest rates in December, for clues on the movement of the dollar.
Underlining the glut, analysts expect the latest weekly reports on U.S. supplies to show crude inventories, already close to a record high, rose further.
The American Petroleum Institute, an industry group, releases its supply report at 3:30 p.m. CST (21:30 GMT) and the government's data is due on Jan. 27.
Recommended Reading
Exclusive: Tenaris’ Zanotti: Pipes are a ‘Matter of National Security’
2024-04-12 - COVID-19 showed the world that long supply chains are not reliable, and that if oil is a matter of U.S. national security, then in turn, so is pipe, said Luca Zanotti, U.S. president for steel pipe manufacturer Tenaris at CERAWeek by S&P Global.
Exclusive: Liberty CEO Says World Needs to Get 'Energy Sober'
2024-04-02 - More money for the energy transition isn’t meaningfully moving how energy is being produced and fossile fuels will continue to dominate, Liberty Energy Chairman and CEO Christ Wright said.
Chesapeake, Awaiting FTC's OK, Plots Southwestern Integration
2024-04-01 - While the Federal Trade Commission reviews Chesapeake Energy's $7.4 billion deal for Southwestern Energy, the two companies are already aligning organizational design, work practices and processes and data infrastructure while waiting for federal approvals, COO Josh Viets told Hart Energy.
Exclusive: Calling on Automation to Help with Handling Produced Water
2024-03-10 - Water testing and real-time data can help automate decisions to handle produced water.