Oil heads to best week since April

Oil headed for its strongest weekly increase in four months after entering a bull market amid speculation that major producers may act to freeze output as U.S. crude and fuel stockpiles decline.

Futures were little changed in New York, erasing an earlier gain of 1.1 percent, yet still poised for weekly increase of 8.2 percent. While OPEC is unlikely to take action that changes market conditions, its plans to hold informal talks in Algiers next month “were the spark” behind oil’s rally, according to Morgan Stanley. U.S. crude inventories dropped the most in five weeks through Aug. 12, while fuel stockpiles slid a third week, Energy Information Administration data showed Wednesday.

Oil has climbed more than 20 percent to enter a bull market, less than three weeks after it tumbled into a bear market. Russian Energy Minister Alexander Novak said that the nation was open to discussing a freeze after his Saudi counterpart Khalid Al-Falih said that informal talks in September may lead to action to stabilize the market. A deal to cap production was proposed in February but a meeting in April ended with no accord.

“These talks keep resurfacing every few months,” Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London, said in a Bloomberg television interview. “I’m not expecting any miracles. Outside of all these talks, fundamentals have improved markedly.”

West Texas Intermediate for September delivery was 19 cents lower at $48.03 barrel on the New York Mercantile Exchange shortly after 7:40 a.m. Central. The contract rose 3.1 percent to close at $48.22 on Thursday, capping an almost 16 percent advance over the previous six sessions.

Output Freeze

Brent for October settlement slipped 20 cents, or 0.4 percent, to $50.69 a barrel on the London-based ICE Futures Europe exchange. The contract advanced $1.04 to close at $50.89 on Thursday, also entering a bull market after climbing more than 20 percent from its early-August low. Prices are up 7.9 percent this week. The global benchmark crude traded at a $1.93 premium to WTI for October.

For a story on how effective an output freeze would be, click here.

An agreement to freeze output is within reach as Saudi Arabia, Iran and non-OPEC member Russia are producing at, or close to, maximum capacity, Chakib Khelil, former OPEC president and Algerian energy minister, said in a Bloomberg Television interview on Aug. 17. Iranian Oil Minister Bijan Namdar Zanganeh hasn’t decided yet whether to participate in the talks in Algiers next month, a spokesman said on Aug. 16. Iran’s refusal to join the April talks in Doha ultimately prompted the Saudis to block any deal.