Brent oil hits one-year high as optimism grows

New York - Oil rose to a one-year high in London as Saudi Arabia expressed optimism that OPEC will work out a deal with other producers and Russia said it would back an accord. 

Brent crude rose as much as 2.7% to the highest since October 12, erasing a 1.2% drop in early trading. Many other producers have expressed their readiness to work with the Organization of Petroleum Exporting Countries, Saudi Minister of Energy and Industry Khalid Al-Falih said in Istanbul, where he’s attending the World Energy Congress.

He will meet in the next couple of days with his Russian counterpart, who said on Monday his country is ready for an accord with OPEC after the group’s members agree on quotas.

"This is a headline-driven situation, and will remain so as long as everyone is in Istanbul," said Bob Yawger, director of the futures division at Mizuho Securities in New York. "It was the Saudi statement that got us in positive territory and the Russian comments have added to the market’s strength."

Oil has gained about 10% since OPEC provisionally agreed last month to cut production for the first time in eight years. The group’s members will meet this week in Istanbul for talks on implementing the deal and Al-Falih said it’s not unthinkable prices will rise to $60 a barrel by the end of this year.

In the US, output halted its drop to the lowest in more than two years as higher prices bring back drilling activity.

West Texas Intermediate for November delivery rose $1.11 to $50.92 a barrel at 15:42 on the New York Mercantile Exchange. Total volume traded was 10% above the 100-day average.

Istanbul meeting

Brent for December settlement increased $1.16 to $53.09 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.57 premium to WTI for the same month.

Russia is ready in principle to consider OPEC proposals, including the possibility of cuts, Energy Minister Alexander Novak said in Istanbul. It still prefers a production freeze and wants to maintain its current output level. Russian President Vladimir Putin said he hoped OPEC would agree on limits to its crude production in November and that his country was ready to support that decision.

Oil-market news:

Money managers increased long positions in WTI futures and options to the highest level in more than two years during the week ended October 4, according to the Commodity Futures Trading Commission. Bets on falling prices dropped for a second week.

In the Brent market, money managers boosted bullish bets by 11% to 422 500 during the week, according to data from ICE Futures Europe.

The combined length of WTI and Brent rose to a record. Oil prices may reach $55 to $60 by year-end on OPEC talks, BP Chief Executive Officer Bob Dudley said in Istanbul.

The company still sees an average 2017 oil price of $55. A 2017 WTI price forecast of $59 a barrel means US shale oil production should hit bottom in the first quarter of next year, Bank of America Merrill Lynch analysts said in a report.

Almost 1.4 million customers are still without power in the U.S. Southeast as Matthew brought hurricane-force wind gusts and flooding to the Outer Banks of North Carolina.

Output by China, the world’s fifth-largest producer in 2015, will stabilize with prices around $50 and may not rebound until they are above $60, according to Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein.

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