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Oil Futures Hit 3-Week High on Stabilizing Production Optimism

August 12, 2016 at 17:26 by Andrew Moran

Oil prices reached a three-week high after reports have surfaced that there may be stabilizing production measures coming ahead of the informal OPEC (Organization of the Petroleum Exporting Countries) meeting in September.

September West Texas Intermediate (WTI) crude rose $1.00, or 2.3%, to $44.49 per barrel on Friday at 16:52 GMT on the New York Mercantile Exchange. These gains helped crude futures hit their highest levels since July 21.

October Brent crude also climbed $0.88, or 1.91%, to $46.92 a barrel on London’s ICE Futures Exchange.

For the past trading week, oil futures have been gradually recovering after dipping below the $40 mark. Oil prices have still had a tremendous 2016 thus far. Since hitting 12-year lows in February, oil prices have increased more than 70%.

Investors were optimistic after reports suggested that OPEC members may implement output stabilization measures to help raise the price of oil. Earlier this week, it was reported that nations like Venezuela, Ecuador and Kuwait were interested in negotiating production level freezes to help oil prices rise above $55 a barrel. This was previously attempted in April, but Saudi Arabia and Iran walked away from talks.

Saudi Arabian Energy Minister Khalid al-Falih confirmed that his country would once again be interested in helping balance the supply of oil in order to give WTI and Brent prices a slight boost.

We are, in Saudi Arabia, watching the market closely, and if there is a need to take any action to help the market rebalance, then we would, of course in cooperation with OPEC and major non-OPEC exporters.

These comments, though they have elicited a lot of optimism, have surprised some traders because the kingdom has produced record amounts of oil. In July, Saudi Arabia pumped out 10.67 million barrels a day.

The 14-nation bloc is scheduled to meet in Algeria from September 26 to 28.

Oil prices have been slightly fluctuating due to concerns that the world market could experience a major supply glut in the coming months. This has started to weigh on oil prices and begun to put pressure on oil nations to combat this potential situation by slashing output levels.

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