Oil rises over $50 as OPEC set to meet with allies on compliance

Tokyo - Oil in New York briefly rose above $50 for the first time since May after OPEC said the group and its partners will meet next week to discuss why some nations are falling behind on their pledge to cut production.

Futures gained as much as 0.7% after surging 8.6% last week. The Abu Dhabi meeting, co-chaired by Kuwait and Russia, is set to take place after Saudi Arabia said last week it would step up pressure on countries that aren’t complying. The US is said to be considering increasing sanctions against Venezuela’s oil industry, the Wall Street Journal reported, citing two people familiar with the deliberations.

Oil gained last week to rise above its 200-day moving average for the first time since May as concerns eased that efforts by the Organisation of Petroleum Exporting Countries (OPEC) and its allies to curb output will be offset by rising production elsewhere. US rigs targeting crude inched higher last week, rising by two to 766, Baker Hughes Inc. data showed Friday.

“The market is closely watching the adherence to those cuts,” said Daniel Hynes, a Sydney-based analyst at Australia & New Zealand Banking Group. “We estimate that the market is fairly balanced at the moment, so any small swing from output, particularly from OPEC, can push the market either into surplus or deficit.”

Meeting in Abu Dhabi

West Texas Intermediate for September delivery rose as much as 35 cents to $50.06 a barrel on the New York Mercantile Exchange and was at $49.87 at 12:01 in Tokyo. Total volume traded was 77% above the 100-day average. Prices gained $3.94 last week to close at $49.71 on Friday, the highest settlement since May 26.

Brent for September settlement, which expires Monday, added as much as 24 cents, or 0.5%, to $52.76 a barrel on the London-based ICE Futures Europe exchange. The contract added 9.3% last week. The global benchmark traded at a premium of $2.84 to WTI. The more-actively traded October contract climbed as much as 29 cents, or 0.6%, to $52.51.

Representatives of some OPEC and non-OPEC nations will meet in the United Arab Emirates capital on August 7-8 to discuss why some of them aren’t fully implementing their cuts, according to an OPEC statement. Some will argue that the independent sources used by OPEC to assess compliance overestimate their production, according to two people familiar with the matter, who asked not to be identified because the discussions aren’t public.