Crude prices extended gains on Tuesday, buoyed after top producers Russia and Saudi Arabia agreed to cooperate on stabilizing the oil market, but a lack of immediate action to rein in output capped gains.
London Brent crude for November delivery was up 12 cents at $47.75 a barrel by 0330 GMT (1130 ET), after settling up 80 cents on Monday.
The global benchmark on Monday hit a near one-week high of $49.40 after the Russia-Saudi news, but has since pared gains after Saudi Energy Minister Khalid al-Falih said there was no need now to freeze production. He added, however, that freezing output was one of the preferred possibilities.
NYMEX crude for October delivery did not settle on Monday due to U.S. Labor Day holiday. It was trading roughly 20 cents higher from late Monday, up 87 cents at $45.31 a barrel. It rose as far as $46.53 on Monday, the highest since Aug. 30.
Russian Energy Minister Alexander Novak said Russia and Saudi Arabia were moving towards a strategic energy partnership and that a high level of trust would allow them to address global challenges.
The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia will hold informal talks in Algeria later in September.
“The two nations’ cooperation is understandable,” said Kaname Gokon, a strategist with Okato Shoji Co Ltd. “But when oil output is reduced, other producers would receive the benefit. There is still a question whether they can cut production for a sustainable period.”
Several OPEC producers have called for an output freeze to rein in the glut, which arose as supplies from high-cost producers such as the United States soared.
Brent rallied to above $50 a barrel in late August, helped by growing talk of a coordinated production freeze, but prices have since fallen as few believe OPEC will act.
Russia’s Novak said he was open to ideas on what cut-off period to use if producer countries decided to freeze output. Novak said outright oil production cuts may also be discussed in Algeria.
Qatar’s energy minister Mohammed al-Sada was quoted as saying on Monday that the state welcomed the agreement between Saudi Arabia and Russia, adding that oil markets were on their way to re-balancing.
Meanwhile, Iran expects to complete a pipeline and a terminal to export a new grade of crude by year-end, boosting the country’s drive to ramp up oil production to pre-sanctions levels.