WTI touched above $40 a barrel for the first time in two weeks Monday, erasing early losses as the US dollar faded and hopes rose for an agreement this week among state producers that look to reduce the global crude over supply.
West Texas Intermediate was up to $40.60 a barrel on NYMEX, while the global Brent crude benchmark was up to $42.87 a barrel on the ICE Futures Europe Exchange.
The Wall Street Journal reported “analysts said there appeared to be little direct reason for the gains Monday, and said it was likely a combination of a softening dollar, hopes that U.S. oil production and inventory data this week would build on declines last week and that Sunday’s meeting of producers in Doha would yield an agreement to freeze output levels.”
The price of oil has surged more than 14% in the last week, including a 6% gain Friday, as EIA data last week showed a lowering of U.S. supplies. Meanwhile, investors have become optimistic that Sunday’s meeting in Doha will yield actionable results.
But still, there is a coterie of analysts who think that even if an agreement is reached, little will be done to correct the world’s growing crude glut. Government officials in Iraq said Sunday that it boosted production to a record 4.55 million barrels a day in March.
The Wall Street Journal reported “Morgan Stanley said the 4.9 million barrel decline in U.S. inventory was counter-seasonal and due to a number of factors that won’t be repeated. The bank predicted that sentiment will turn negative again this week leading to lower oil prices.”
Members of OPEC and Russia are scheduled to meet in Doha on Sunday to discuss capping oil production at January or February levels.
“We do not expect the meeting to deliver a bullish surprise as we believe production cuts make little sense given it has taken 18 months for the rebalancing to finally start,” Goldman Sachs said recently in a note.
Conversely, investors are looking at nodes of substantial oil demand, such as China, to consume excess crude.
“In February, China’s crude imports rose nearly 25% on-year to 31.8 million metric tons, equivalent to roughly 8 million barrels a day, the highest daily average on the record,” reported the Wall Street Journal.