Global oil benchmark, Brent crude, hit an eight-week high on Thursday as the world’s biggest producers prepared to discuss a possible freeze in production levels.
Brent, against which half of the world’s oil is priced, rose by $0.84 to $50.69 per barrel as of 7:58pm Nigerian time.
The benchmark has risen more than 20 per cent from a low in early August on news that the Organisation of Petroleum Exporting Countries and other key exporters may revive talks on freezing output levels when they meet in Algeria next month.
The rally has also been driven by short covering, as speculators including hedge funds and other money managers have amassed record short positions.
Many OPEC members, including Nigeria, have been hurt badly by a collapse in oil prices over the last two years. While some Gulf oil exporters have very low output costs, other producers such as Iran and Venezuela need oil prices above $100 to balance their budgets.
“With the lack of investment from outside oil companies, the sovereigns will be the best hope to raise production next year in a situation where it is likely that demand will exceed global output and that in and of itself is a reason that a production freeze at current levels still matters,” a senior energy analyst at Price Futures Group, Phil Flynn, was quoted by the CNBC as saying.
OPEC members will meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria on September 26-28.
Brent crude had on June 8 climbed by as much as 2.1 per cent to touch $52.54, the highest price since last October.
But it later fell to as low as $43 on July 27 after official United States energy data showed an unexpected glut of oil in storage.
Oil prices have rallied from lows of under $28 per barrel in January to trade above the $50 per barrel mark in June, spurred by a string of international oil production outages in the second quarter that offered temporary respite from the global glut.
The return of oil production in Canada and Nigeria after supply disruptions, combined with a strengthening US dollar, later pushed the market into reverse and sparked fears that further losses could undermine the global price recovery.