The hope for better days in the oil industry was strengthened monday when the price of oil continued its soar for the third consecutive day, rising more than 8 percent, following a downward revision of U.S. crude production quota and the readiness of Organisation of Petroleum Exporting Countries (OPEC) to talk with other producers, a move which helped to extend the biggest price surge in 25 years, Reuters reported on monday.
OPEC, the producer of 40 percent of the world’s oil, renewed its readiness to talk to other crude exporters to achieve “fair and reasonable prices,” according to the group’s monthly magazine.
“There is no quick fix, but if there is a willingness to face the oil industry’s challenges together, then the prospects for the future have to be a lot better than what everyone involved in the industry has been experiencing over the past nine months or so,” said the opening commentary in its latest bulletin published on its website.
“As the Organisation has stressed on numerous occasions, it stands ready to talk to all other producers.”
Oil jumped to the highest in a month on the report released by OPEC.
Brent October futures rose $4.10, or 8.2 percent, to settle at $54.15 a barrel, with volumes relatively muted by a British public holiday, according to the newswire.
U.S. crude gained $3.98, or 8.8 percent, to settle at $49.20 a barrel, taking three-day gains to 27.5 percent, the highest over three days since August 1990.
In dollar terms, it is the biggest three-day gain since February 2011.
U.S. crude oil prices have risen high more than $10 a barrel in three days, erasing the month’s declines as a series of relatively small-scale supply disruptions and output risks prompted bearish traders to take profits on short positions, which had been at near record highs a week ago.
The unprecedented shock in the global crude oil market had forced the producers to scale down on investments and reduce their workforce in the face of weak balance sheets.
Brent, which was sold for $115 per barrel in June 2014, later dropped to an all-time low of $45.19 in January this year and $46.41 two weeks ago.
The prices had initially surged earlier in the year, fueling speculations of imminent recovery, but they later witnessed a fresh dip.
In early February, the prices rose consecutively for a third day to the $53 a barrel range, as the month’s World Oil Outlook report by OPEC, predicted that Canada’s oil output would grow more slowly than expected because of lower oil prices.
However, yesterday, prices fell initially but reversed course mid-morning to accelerate into the close, extending gains to more than the 20 percent mark that often signals a bull market. Even so, few were prepared to call a definitive end to the slump.
“Sharp gains over the past three trading sessions were driven by a combination of short covering and chart-readers again looking to call a bottom falsely,” Citi said in a report, saying that prices may yet experience new lows before year’s end.
While some analysts have been warning of a rebound in prices after a one-third slump since late June, most have been shocked by the whiplash of the past few days, and wondered whether it was an overreaction to relatively mild triggers.
Yesterday, some cited a commentary in the latest OPEC Bulletin publication suggesting the group may be increasingly willing to talk to other producers about curbing output as a factor, even though it was broadly in line with previous comments. There has been no indication this summer that core Gulf OPEC members are pushing for more talks.
The rally was also fueled by revised U.S. government figures showing that domestic production in the first half of the year was lower than initially reported. Even so, the data was in line with the overarching narrative of an industry in decline.
The Energy Information Administration said its new survey-based output data showed that the United States pumped a hair below 9.3 million barrels per day in June, down by 100,000 bpd from a revised May figure. June figure was also nearly 250,000 bpd below what the EIA had estimated a few weeks ago.