Oil prices rose in early trading on Monday, lifted by reports of renewed talks by some members of the Organization of the Petroleum Exporting Countries (OPEC) to restrain output.
U.S. West Texas Intermediate (WTI) crude futures were at $41.99 per barrel at 05:36 GMT, up 19 cents or 0.5% from their last close.
Brent futures were trading at $44.47 per barrel, up 20 cents, or 0.5%.
The price rise came on the back of renewed calls by some OPEC members to freeze production in a bid to rein in output that has been consistently outpacing demand.
“OPEC members including Venezuela, Ecuador and Kuwait are said to be behind this latest reincarnation. But just like previous endeavors, it seems doomed to fail, given key OPEC members (think: Saudi Arabia, Iraq, and Iran) persist in their battle for market share, ramping up exports apace,” said Matt Smith of ClipperData in a note.
Yet in the absence of an agreement, a fight for market share via high output and price discounts is still weighing on markets.
Hedge funds and other money managers have aggressively positioned themselves in expectation of lower prices, raising the amount of short positions in WTI futures that would profit from lower prices to a new all-time record.
Iraq has dropped the September official selling price for Basra Light crude to Asia by $1 to minus $2.30 a barrel against the average of Oman/Dubai quotes from the previous month, the State Oil Marketing Organization said on Monday, making it the latest exporter to drop its prices.
Meanwhile, the amount of oil rigs drilling in the United States rose to 381, the highest amount since March.
On the demand side, AB Bernstein said that oil demand growth had been strong in 2015 and the first half of this year, at 2% and 1.5% respectively, but that the outlook was weakening.
“In July following the UK Brexit vote, the IMF downgraded global growth by 10 basis points (bp) in 2016 and 20 bp in 2017. This has negative implications for demand,” the analysts said, adding that they expected oil demand growth to slow to around 1.1% in the second half of 2016 and to below 1% next year.
Such a slowdown would likely weigh on prices.
“If record to near-record demand this summer for gasoline and crude oil failed to eat into the supply glut, then what happens to the glut once demand drops off this fall by around 1 million barrels per day?” asked the U.S.-based Schork Report in a note, adding it was bearish in its oil price outlook.