Oil heads for biggest monthly gain since April before OPEC talks

Bloomberg

Oil is poised for the biggest monthly advance since April as the global surplus diminishes and OPEC’s planned talks fan speculation it could reach an accord on output.
Futures slid 1 percent in New York, trimming the monthly gain to 10 percent. Iraq’s Prime Minister Haidar Al-Abadi said Tuesday the country would support a proposal among major producers to freeze output. Prices on Wednesday were capped by a report that U.S. crude stockpiles increased by 942,000 barrels last week, according to the industry-funded American Petroleum Institute.
Oil entered a bull market Aug. 18, less than three weeks after tumbling into a bear market.
A limit on production would be positive for the market, Saudi Arabia’s Energy Minister Khalid Al-Falih said in an interview last week, while ruling out an actual cut to output.
A freeze deal between members
of the Organization of Petroleum
Exporting Countries and other producers was proposed in February but a meeting in April ended with no final accord.
Prices “should work higher,” Ed Morse, head of commodities research at Citigroup Inc. in New York, said in a Bloomberg Television interview. “OPEC is close to capacity. Saudi Arabia is a hair under 11 million barrels a day. There’s not much scope for an increase there.”
West Texas Intermediate for October delivery was at $45.89 a barrel on the New York Mercantile Exchange, down 46 cents, at 8:42
a.m. local time. The contract declined 63 cents to settle at $46.35 on Tuesday. Total volume traded Wednesday was about 26 percent below the
100-day average.
Brent for October settlement, which expires Wednesday, was down 65 cents at $47.72 a barrel on the London-based ICE Futures Europe exchange, trading at a $1.83 premium to WTI. The global benchmark crude dropped 1.8 percent on Tuesday. The more-active November contract fell 56 cents to $48.17 a barrel.
Oil is still trading at half its level two years ago. The prolonged
decline is hurting Iraq, Al-Abadi said in Baghdad, pledging to support a potential output freeze deal. The
nation is the second-biggest member of OPEC, pumping 4.36 million barrels a day in July, according to data compiled by Bloomberg. Saudi Arabia is the largest, producing 10.43 million a day.
The U.S. government is due to release its crude-stockpile report later Wednesday.
The data may show a 1.3 million-barrel increase, according to a Bloomberg survey. Gasoline inventories probably fell by 1 million barrels last week, the survey showed.
Schlumberger Ltd. is expecting the drilling market to get worse in the third quarter thanks to a further deterioration in deepwater work around the world. Saudi Arabia, the world’s biggest oil exporter, won’t boost output to capacity and flood the market, Al-Falih said in an interview with Al-Arabiya television.