The price of a barrel of crude oil rose to its highest in nearly a month on renewed speculation that several major producing nations will attempt to reach an agreement on production cuts in an effort to boost prices.
Prices for West Texas Intermediate, the American crude standard, have soared 15.5 percent from their close on August 2nd at $39.51 to $45.64 (10.55 am Monday).
Saudi Arabia the world's largest swing producer, said that it is willing to discuss 'stabilizing markets', the oil market euphemism for limits on production, at next month's OPEC planning meeting. "Russia is open to talks for a joint output freeze “if necessary,” Energy Minister Alexander Novak told Saudi Arabian newspaper Asharq Al-Awsat," and reported By Bloomberg.
There have been several attempts by the fourteen member OPEC (Organization of Petroleum Exporting Countries) group to arrange a freeze, cap or cut in production with Russian, the world’s largest oil producer after Saudi Arabia and the United States to limit the supply of oil on the global market.
Each prior essay at a production agreement foundered on the initial problem of which countries should limit production and by how much and then by enforcement concerns, as a number of OPEC members are in dire need of revenue and are thought to be willing to circumvent any limits to foster sales.
Beyond the reach of potential OPEC and Russian production restrictions are U.S and Canadian shale producers who will add rigs and production whenever they think current and future prices warrant.
American producers added drilling rigs for the seventh week in a row last week, the longest run since the price collapse in 2014, according to Baker Hughes information on Friday. U.S. crude oil rigs increased by 15 to 396, the highest level since February 26th. Drillers had added 7 rigs the prior week.
Exploration companies have now added 66 rigs since June 24th, led by rising activity in the Permian Basin which covers parts of Western Texas and Southeastern New Mexico. Production costs in the basin are projected to be competitive with Saudi Arabia, the world's lowest cost producer of high grade ‘sweet’ crude oil. At the peak in late 2014 there were just over 1600 rigs operating in the U.S.
Over the past two years a barrel of WTI has plunged 57.4 percent from $107.26 (6/20/14) to today's quote at $45.64 along the way touching $29.42 back on January 20th, a more than twelve year low.
Brent, the European and global standard for crude, added 33 cents, or 0.7 percent, to $47.30 a barrel on the London ICE Exchange in the futures contract for October settlement. Brent generally trades at a premium to WTI because of its relatively cheaper delivery profile for most of the world.
Chief Market Strategist
WorldWideMarkets Online Trading
Charts: Bloomberg, Business Insider