Oil extends rally on prospects OPEC could act to counter low prices

Oil prices rose on Monday, extending a rally triggered last week by speculation that Organisation of Petroleum Exporting Countries (OPEC) might agree to cut production to reduce a supply glut. The glut has pushed prices to the lowest in over a decade.

Brent crude futures, the global benchmark, were up 33 cents at $33.69 a barrel. US futures traded at $29.79 a barrel, up 35 cents on Friday’s close.

Trade is likely to be thinner than usual on Monday due to the US Presidents Day holiday. “Some traders still think about the chances of an OPEC plus Russia (production) cut and close their short positions,” said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.

The United Arab Emirates’ energy minister said the OPEC was willing to cooperate on an output cut, the Wall Street Journal reported last week.

And Nigeria’s oil minister told Reuters the mood inside OPEC was shifting to a growing consensus that a decision must be reached on how to prop up prices.

Non-OPEC member Russia said on Monday it wanted to see improved relations between Iran and Saudi Arabia at a time when joint action was needed to influence global oil prices, according to the RIA news agency.

“The fact that the market has reacted so strongly certainly indicates that these comments are being taken seriously,” said analysts at Frakfurt-based Commerzbank.

However, many analysts, including the International Energy Agency, are still sceptical OPEC will cut a deal with other producers to reign in ballooning output.

“We continue to believe that if prices were to be artificially supported with production cuts it would only give more expensive forms of production more room to breathe and would only solve the problem in the short term,” Phillip Futures said in a note.

Iran is exporting 1.3 million barrels per day (bpd) of crude oil and will be pumping 1.5 million bpd by the start of the next Iranian year on March 20.