Oil market stages rebound
April 11 2016 08:10 PM
Oil Rig
Brent North Sea crude for June delivery added 98 cents to $42.92 a barrel compared with Friday's close.

AFP/ London

World oil prices rebounded Monday as dealers eyed supportive US data and hopes that producers will agree to limit crude output at a crucial upcoming meeting in Doha.

About 1615 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May rose 88 cents to $40.60 per barrel.

Brent North Sea crude for June delivery added 98 cents to $42.92 a barrel compared with Friday's close.

The oil market had rallied last week on US figures, with both contracts winning eight percent or more in value.

Data showing US stockpiles and output had seen a surprise fall provided some much needed impetus, with another fall in the number of active drilling rigs --  pointing to a continuing fall in production.

"The price of oil challenged its 2016 peak, after reversing small early losses, as sentiment continues to improve after data from Baker Hughes showed the number of active rigs in the US dropped for the 15th time in 16 weeks," said CMC Markets analyst Jasper Lawler on Monday.

"The drop in the rig count ... matches data showing US production slowed for the 10th time in 11 weeks," he noted.

Dealers are meanwhile awaiting the next stockpiles report due Wednesday hoping for a further fall in oil inventories, which would indicate a pick-up in demand.

However, the key focus is now on the April 17 meeting in Doha, where most of the world's top producers led by Russia and Saudi Arabia will discuss global oversupply.

A chronic worldwide supply glut sent oil prices collapsing by three quarters between August 2014 and February this year.

"There are clearly increased hopes again that the meeting of oil producers in Doha next Sunday will produce a substantial result after all," said Commerzbank analyst Carsten Fritsch in a research note to clients.

"The Russian oil minister for instance continues to hope for an agreement on production caps. 

"We are sceptical about this... There is thus a risk of a price correction if the market is disappointed by the outcome of the meeting."

While there is a growing expectation the Doha meeting will see signatories agree to a production freeze at January 2016 levels, analysts remain uncertain of the long-term impact of such a deal.

Some oil industry experts warn that a production cut, not a freeze, would be more effective in boosting crude prices.

FXTM analyst Lukman Otunuga cautioned that oil prices would continue to languish at ultra-low levels.

"The fundamentals of an unrelenting oversupply should keep prices depressed," Otunuga said.

"Even if theoretically production is frozen, Iran continues to boost output."

The global oil glut has worsened in recent months because of the return of Iranian crude to world markets -- after years of economic sanctions on Tehran that were lifted following a nuclear deal last year.

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