Oil market sentiments in positive swing

Global oil market sentiments have become increasingly more positive amid speculation that a production freeze by some OPEC members and Russia could eventually help to abate the surplus.

“The market is going toward stabilization,” Chakib Khelil, former Algerian minister of energy, said in an interview with Bloomberg Television. “Saudi Arabia has achieved its objective to cut non-OPEC production” and the output freeze is “a good start that we can build on” to rebalance the market, he said.

Futures have risen by as much as 7.6 percent in New York. The Stoxx Europe 600 Index was up 2.1 percent, following its best week in a year. Iran was “constructive” on the deal struck last week to limit output, although it hasn’t said whether it may join the pact, Russian Energy Minister Alexander Novak told state TV on Saturday. The global surplus will last into 2017, longer than previously reported amid resilient U.S. shale output, the International Energy Agency said.

“There are expectations that something will take place to limit oversupply,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “It looks like the market needs evidence the glut is worsening to stay below $30 a barrel. We’re pivoting around $30 in very volatile trading until we get the next market driver.”

Crude is still down 15 percent this year on speculation that a worldwide surplus will persist amid the outlook for increased Iranian exports after the removal of sanctions and brimming U.S. stockpiles. Saudi Arabia, Russia, Venezuela and Qatar reached a preliminary agreement in Doha last week to freeze output at January levels if other states join them.

The agreement to freeze output includes Qatar and Venezuela and is the “beginning of a process” that could require “other steps to stabilize and improve the market,” Saudi Oil Minister Ali al-Naimi said after the talks last week. The kingdom pumped 10.2 million barrels a day last month, according to data compiled by Bloomberg. Russia produced 10.9 million, a post-Soviet record.

While Nigeria, a fellow a member of the Organization of Petroleum Exporting Countries, backs the freeze, Iran and Iraq should be allowed to recover lost market share, Minister of State for Petroleum Resources Emmanuel Kachikwu said Sunday.