Global oil benchmark, Brent crude, hit an eight-week high on Thursday even as the world’s biggest producers are prepared to discuss a possible freeze in production levels.
Reports say, Brent, against which half of the world’s oil is priced, increased by $0.84 to $50.69 per barrel as of 7:58pm Nigerian time.
The benchmark we gathered has risen more than 20 per cent from a low in early August this year on news that the Organisation of Petroleum Exporting Countries and other key exporters may begin talks on freezing output levels when they meet next month in Algeria.
The rally increased as a result of short covering, as speculators including hedge funds and other money managers have amassed record short positions.
Meanwhile, many OPEC members like Nigeria, have been badly affected by a collapse in oil prices over the last two years even as some Gulf oil exporters have very low output costs, other producers such as Iran and Venezuela need oil prices above $100 to balance their budgets.
Meanwhile a senior energy analysts, Phil Flynn was quoted as saying that, “With the lack of investment from outside oil companies, the sovereigns will be the best hope to raise production next year in a situation where it is likely that demand will exceed global output and that in and of itself is a reason that a production freeze at current levels still matters.”
In the meantime, OPEC members are billed to meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria on September 26-28.
It would be recalled that Brent crude had on June 8 climbed by as much as 2.1 per cent to touch $52.54, the highest price recorded since last October.
However, this later fell to as low as $43 on July 27 after official United States energy data showed an unexpected glut of oil in storage.
Prices of oil have rallied from lows of under 28 per barrel in January to trade above the $50 per barrel mark in June, driven by a string of international oil production outages in the second quarter that offered temporary respite from the global glut.
But the return of oil production in Canada and Nigeria after supply disruptions, combined with a strengthening US dollar, later pushed the market into reverse and sparked fears that further losses could undermine the global price recovery.
