Oil prices rise on Saudi optimism over OPEC deal

Oil prices rose on Thursday as expectations of an OPEC deal to limit production outweighed growing evidence of global oversupply and rising inventories, particularly in the United States.

Saudi Energy Minister Khalid al-Falih said on Thursday he was optimistic the Organization of the Petroleum Exporting Countries would formalize a preliminary oil output deal reached in Algeria in September.

“I’m still optimistic that the consensus reached in Algeria for capping production will translate, God willing, into caps on states’ levels and fair and balanced cuts among countries,” he told Saudi-owned Al-Arabiya TV.

Falih said he believed the market was on its way to becoming balanced and that an agreement by OPEC at its meeting in Vienna on Nov. 30 would speed the recovery. He also said OPEC should cut oil output to 32.5 million barrels per day (bpd), the lower end of a previously agreed range.

Brent crude oil was up 58 cents a barrel, or 1.2 percent, at $47.21 by 10:10 a.m. ET (1510 GMT). U.S. light crude was up 63 cents, or 1.4 percent, at $46.20.

U.S. crude inventories rose by 5.3 million barrels in the week to Nov. 11, well above forecasts of an increase of 1.5 million barrels, data from the U.S. Energy Information Administration showed on Wednesday.

Stocks are also rising elsewhere, thanks to record output by OPEC, which pumps around 40 percent of world oil supply.

“The name of the game is ‘volatility’ as confusing signals are arriving before OPEC meets,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.

“We have evidence of oversupply — U.S. stocks rising — versus hopes for some action by OPEC.”

Venezuelan President Nicolas Maduro said on Wednesday OPEC countries are ready to reach a “forceful” agreement on cutting oil output. Maduro met OPEC Secretary-General Mohammed Barkindo in Caracas to discuss a possible OPEC deal.

Russia has also expressed willingness to support an OPEC decision to freeze output, Russian Energy Minister Alexander Novak said.

But rising oil production and changing fundamentals “make a credible OPEC cut all the more difficult to achieve,” Jason Gammel, analyst at U.S. investment bank Jefferies, said.

“The physical market has shifted back to oversupply because of surging OPEC output, with the most material increases driven by improving security conditions in Libya and (tenuously) Nigeria,” he said.

Jefferies expects Brent to average $58 a barrel next year.

Saudi Arabia’s crude oil exports rose to 7.812 million barrels per day in September as the world’s top oil exporter increased shipments by 507,000 bpd versus August, official data showed on Thursday.

“The exports figures suggest that they will not give up a critical card that they are going to use in the OPEC negotiations to freeze or reduce OPEC production before they reach such an agreement at the November meeting,” said Sadad al-Husseini, an energy consultant and former Saudi Aramco senior executive.