Crude oil prices on Tuesday surged about four per cent after the United States inventory data showed a drop in stocks to nearly a two-decade low as crude imports into the US Gulf Coast slid last week due to Tropical Storm Hermine.
This is coming as the Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), Mr. Mohammed Barkindo, will today in Paris, France, meet the oil ministers of Saudi Arabia and Algeria as part of the renewed efforts to secure a global agreement to cut crude oil production to ensure the recovery of prices.
US crude stocks dropped 14.5 million barrels last week to 511.4 million barrels, the biggest weekly drop in stockpiles since January 1999, according to the US Energy Information Administration.
Brent crude oil neared $50 a barrel for the first time in two weeks.
It rose $1.84 to $49.82 a barrel, a 3.8 per cent gain, while the West Texas Intermediate crude was up $1.83, or 4 per cent, to $47.33 per barrel.
Tropical Storm Hermine, which threatened the Gulf Coast refining region last week, scuttled some US oil production and limited imports and shipping.
Gulf Coast crude imports hit the lowest levels on record last week, data showed, even though the storm ultimately did not harm Gulf facilities.
In a related development, Reuters reported that Algeria would host today’s informal meeting with Saudi Energy Minister, Khalid al-Falih and OPEC’s Barkindo.
A source at OPEC confirmed the meeting as part of a push for an output deal with producers battered by a glut-induced halving of oil prices over the past two years.
“There is a strong move towards a deal between OPEC and non-OPEC members to at least freeze production,” an OPEC source told Reuters.
“It seems we are going in this direction. But if we are going to freeze, we have to use secondary sources to gauge production levels. We can’t allow each country to use a different method,” the source said.
“Iran must agree to be in line with other producers and use secondary sources.”
Tehran has said that it supports any measures to stabilise the market. However, it has stopped short of indicating whether it would join a global deal before its production reaches 4 million barrels per day, the level it was pumping before the imposition of Western sanctions in 2012.
The sanctions ended in January this year.
Iran has been the main factor preventing an output deal between OPEC and non-OPEC Russia as Tehran has said it should be excluded from any such agreement before its production recovers.
The OPEC source said Iran’s production before sanctions had never exceeded 3.75 million bpd.
Iran has said it is producing slightly more than 3.8 million bpd. It signalled on Tuesday it was prepared to work with Saudi Arabia and Russia to prop up prices, although Tehran has begun to bargain with OPEC on possible exemptions from any output cap.
The OPEC source said major oil producers were trying to convince Tehran to come onboard, adding that there was an initial understanding that only Libya could be offered an exemption.
“Now there is a push to smooth things out and solve any problem,” the OPEC source said, adding there had been no agreement yet on any level at which to freeze production.
“This will be discussed in Algeria,” the source said.
Algeria is hosting meetings of the International Energy Forum and OPEC on September 26-28.
OPEC and Russia are expected to revive talks for a global deal on production in Algeria.