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US crude settles at $52.63, down 1%, as more US drilling revives concern about oil glut

CNBC

A worker on a Nabors crude oil drill near New Town, North Dakota.
A worker on a Nabors crude oil drill near New Town, North Dakota.

Oil prices fell on Monday as news of another increase in U.S. drilling activity spread concern over rising output just as many of the world’s oil producers are trying to comply with a deal to pump less in an attempt to prop up prices.

The number of active U.S. oil rigs rose to the highest since November 2015 last week, according to Baker Hughes data, showing drillers are taking advantage of oil prices above $50 a barrel.

U.S. crude futures settled down 54 cents, or 1 percent, at $52.63. Global benchmark Brent crude oil prices were down 32 cents at $55.20 a barrel at 2:33 p.m. ET (1933 GMT).

Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg, said “three factors that have been weighing on prices: the stronger U.S. dollar, the steady increase in U.S. rig counts and the (latest OPEC compliance data).”

When it comes to oil, don't forget about demand: Expert

When it comes to oil, don’t forget about demand: Expert   

The Organization of the Petroleum Exporting Countries and other producers including Russia agreed to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017 to relieve a two-year supply overhang.

First indications of compliance to that deal show members have cut production by 900,000 barrels per day (bpd) in January, according to Petro-Logistics, a company that tracks OPEC supply.

That suggests only 75 percent of the targeted cuts would be met, said Tony Headrick, energy analyst at CHS in Minnesota.

“There’s an apprehension about how big that cutback is going to be versus the strength in U.S. crude production,” Headrick said. “That gap is a little narrower than folks had anticipated more recently.”

Tamas Varga, analyst at PVM Oil Associates in London, said the news was “not very encouraging” because it implied that only 75 percent of the OPEC production cut target was being met.

What's next for big oil?

What’s next for big oil?   

Oil prices have remained above $50 a barrel since producers agreed the deal in December, incentivising drillers in low-cost U.S. shale producing regions to ramp up activity.

“In our view the strong rise in U.S. shale oil rigs is a good thing because it will be needed over the next three years as non-OPEC, non-U.S. crude production continues to be hurt by the deep capex cuts both past and present in that segment,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.

He estimated the U.S. rig count will continue rising at a rate of seven rigs per week over the first half of the year.

Analysts at J.P. Morgan said they saw a rise in oil prices beyond $60 a barrel in 2018 as unlikely.

“For prices to be supported above $60/bbl in 2018 would likely require continued OPEC output reductions that continue to tighten the market beyond Q3’17 – something that looks unlikely at this juncture,” they said in a report to clients.

Iran’s oil minister Bijan Zanganeh said on Monday he expected oil prices to remain at around $55 a barrel this yes, according to Mehr news agency.

Oil prices steady on weaker dollar, but doubts over output cuts linger

REUTER

By Henning Gloystein | SINGAPORE

SINGAPORE Oil prices were steady on Monday, supported by a weaker dollar, although doubts that OPEC and other producers would fully implement announced crude output cuts held the market back.

Brent crude futures LCOc1, the international benchmark for oil prices, were trading at $55.40 per barrel at 0758 GMT (02:58 a.m. ET), within 0.1 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $52.32 a barrel, also within 0.1 percent of their last settlement.

Traders said that oil received some support from a weaker dollar, which makes fuel purchases cheaper for countries that use other currencies domestically, potentially spurring demand.

After spending much of the second half of 2016 in an upward trend, the dollar has fallen around 2.5 percent against a basket of other leading currencies .DXY since its early-January peak.

The greenback is in particular focus this week as Donald Trump is set to take office as the next U.S. president on Friday.

“Oil pricing will be driven this week by the movement of the U.S. dollar rather than crude itself, with President-elect Trump’s inauguration … being the main event,” said Jeffrey Halley of OANDA brokerage in Singapore.

But traders said that doubts over full implementation of an announced crude output cut from major producers including the Organization of the Petroleum Exporting Countries (OPEC) and Russia were holding back oil prices.

OPEC has said it would reduce its output by 1.2 million barrels per day (bpd) to 32.5 million bpd from Jan. 1, and Russia as well as other non-OPEC members are planning to cut about half as much again.

However, Russian oil and gas condensate production averaged 11.1 million bpd from Jan. 1-15, two energy industry sources said on Monday, down just 100,000 bpd from December. Russia has committed to a 300,000 bpd cut during the first half of 2017 as a part of a global deal with OPEC.

Rising U.S. oil output is also preventing crude from climbing further.

Goldman Sachs said it expected year-on-year U.S. oil production to rise by 235,000 bpd in 2017, taking into account wells that have been drilled and are likely to start producing in the first half of the year.

Overall U.S. oil output stands at 8.95 million bpd, up from less than 8.5 million bpd in June last year and back at similar levels to 2014, when OPEC decided to start a price war against U.S. shale producers and sent the market into a tailspin.

(Reporting by Henning Gloystein; Editing by Sonali Paul and Christian Schmollinger)

Crude Oil Price Falls

Crude Oil Price Falls on Shock Inventory Increase

Shutterstock photo

The U.S. Energy Department’s inventory release showed that crude stockpiles recorded an unexpected build. This weighed on oil prices , sending West Texas Intermediate (WTI) crude futures down 1.5% (or 81 cents) to $41.71 per barrel Wednesday.

On a bullish note, the report revealed that refined product inventories – gasoline and distillate – both decreased handsomely from their previous week levels.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 2.26 million barrels for the week ending Dec 16, 2016, following a decline of 2.56 million barrels in the previous week.

The analysts and traders surveyed by The Wall Street Journal had expected crude stocks to go down some 2.3 million barrels. A jump in imports led to the surprise stockpile build with the world’s biggest oil consumer.

The latest inventory increase adds to the supply of excess oil in the U.S., though the year-over-year storage surplus has narrowed down considerably in recent months after a run of drawdowns.

At 485.45 million barrels, current crude supplies are up 7% from the year-ago period and are at upper limit of the average range for this time of year.

However, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down 245,000 barrels from previous week’s level to 66.26 million barrels.

The crude supply cover – at 29.5 days – remained flat from previous week. In the year-ago period, the supply cover was 29.1 days.

Sector 5YR % Return

Sector 5YR % Return

Gasoline: Supplies of gasoline were down for the first time in 6 weeks on falling imports and strengthening demand. The 1.31 million barrels draw – contrary to the analysts’ polled number of 1.1 million barrels increase in supply level – took gasoline stockpiles down to 228.74 million barrels. Despite last week’s decrease, the existing stock of the most widely used petroleum product is 4% higher than the year-earlier level and is well above the upper half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) went down by 2.42 million barrels last week, dwarfing analysts’ expectations for a 900,000-barrels fall. The second successive weekly decrease in distillate fuel stocks could be attributed to higher demand and lower imports. At 153.52 million barrels, distillate supplies are 1.5% higher than the year-ago level and are sitting over the upper half of the average range for this time of the year.

Refinery Rates: Refinery utilization was 91.5% for the week.

About the Weekly Petroleum Status Report

The Energy Information Administration (EIA) Petroleum Status Report, containing data of the previous week ending Friday, outlines information regarding the weekly change in petroleum inventories held and produced by the U.S., both locally and abroad.

The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of petroleum products. It is an indicator of current oil prices and volatility that affect the businesses of the companies engaged in the oil and refining industry.

The data from EIA generally acts as a catalyst for crude prices and affect producers, such as ExxonMobil Corp. XOM , Chevron Corp. CVX and ConocoPhillips COP , and refiners such as Tesoro Corp. TSO , Phillips 66 PSX and HollyFrontier Corp. HFC .

However, each of these firms has a Zacks Rank #3 (Hold), which does not make them screaming buys. In case you are looking for energy names for your portfolio, one could opt for Newfield Exploration Co. NFX . It has a Zacks Rank #1 (Strong Buy).

US crude settles up 3.9% at $47.49 ahead of OPEC decision on output

CNBC

Crude oil higher on hopes for OPEC production cut

Crude oil higher on hopes for OPEC production cut   

Oil prices rose more than 4 percent to a three-week high on Monday, bolstered by growing conviction that major oil producing countries would agree to limit output at a meeting next week.

Brent crude oil briefly touched $49 a barrel. The London benchmark has risen 11 percent in a week since Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, started a diplomatic charm offensive to persuade the group’s more reluctant members to join its proposed output plan.

In recent days, several OPEC members including Iran, along with non-member Russia, have suggested they were leaning toward a deal to limit output.

“When you’ve got all of the major players on board with a production cut, obviously you’re very close to getting a deal done,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

“You never know with OPEC — sometimes they go to the last minute and there are a lot of false starts.”

Sunoco Logistics buys Energy Transfer Partners

Sunoco Logistics buys Energy Transfer Partners   

Brent crude oil futures were up $2.12, or 4.5 percent, at $48.98 a barrel by 2:28 p.m. ET (1928 GMT), having touched their highest level since Nov. 2, while U.S. West Texas Intermediate (WTI) crude were up $1.73, or 3.7 percent, at $47.42 a barrel.

The dollar eased off last week’s 13½-year highs as Treasury yields nudged lower, bolstering oil and the broader commodities complex including copper and gold.

Goldman Sachs analysts said in a note that chances of an OPEC cut succeeding have increased, and they believe the global oil surplus will shift into a deficit by the middle of next year, which would support prices.

“Our base case now is that an OPEC production cut will be announced and implemented,” they wrote. In late September, the brokerage said conditions were not optimal for a cut to work.

Russian Vladimir Putin said he saw no obstacle to non-OPEC member Russia agreeing to freeze oil output, which at more than 11 million barrels per day is at a post-Soviet high.

Meanwhile, OPEC members last week proposed a deal for Iran to cap, rather than cut, output.

Iran has been one of the main hurdles facing any output curtailment by OPEC, as Tehran wants exemptions to try to recapture market share lost under years of Western sanctions.

Libya and Nigeria, whose exports have been hampered by violence, have also asked to be left out of any deal. A recovery in production from both countries means the onus to cut rests on Saudi Arabia and its Gulf neighbors.

OPEC Meetings

OPEC needs a production ceiling: Analyst   

“While loose terms may be agreed, I remain skeptical that a full detailed agreement can be both achieved and carried out by OPEC given the clear differences that are so evident between certain key members,” OANDA markets strategist Craig Erlam said.

Barclays analysts said some form of deal was likely, but warned an agreement could have little impact.

“We expect OPEC to agree to a face-saving statement … (but) U.S. tight oil producers can grow production at $50-$55 (per barrel) and will capitalize on any opportunity afforded to them by an OPEC cut,” the bank said.

Hedge funds raised their net holdings of U.S. crude futures and options for the first time in three weeks in the week to Nov. 15, having delivered one of the largest cuts on record the previous week. The move highlights the nervousness among investors about betting heavily on oil in either direction.

Oil tumbles as OPEC output swells at the fastest pace in 8 years

A worker takes oil samples from a well at the Gazpromneft-owned Yuzhno-Priobskoye oil field outside the West Siberian city of Khanty-Mansiysk, Russia, January 28, 2016. REUTERS/Sergei Karpukhin/File Photo Thomson Reuters

Crude oil prices fell on Friday after the Organization of Petroleum Exporting Countries reported another jump in production in October.

OPEC pumped 33.64 million barrels per day, up from 240,000 in September, according to its monthly report. This was the highest in at least eight years, according to Reuters.

This increase throws into doubt the chances that the oil cartel will implement limits to its production levels when it meets November 30. Reduced output could lift oil prices and the economies of OPEC members dependent on revenue from exports.

West Texas Intermediate crude oil futures for December delivery fell by as much as 2% to $43.75 per barrel, close to the lowest level in nearly two months.

Iran continued to be a big source of overall OPEC output. It said it produced 3.92 million barrels per day in October, although secondary sources pegged that lower at 3.69 million, according to Reuters. Nigerian production increased the most month-on-month, by 223,000 barrels per day; earlier this year, militant attacks in the Niger Delta region hampered production.

Like other risk assets including stocks, futures tanked on Tuesday in the initial knee-jerk reaction to President-elect Donald Trump’s victory in the election. They rebounded on Wednesday, but are still down about 2% for the week after two straight days of declines.

Oil shares pull Asian stocks higher; yen slips

By Saikat Chatterjee | HONG KONG

HONG KONG Oil shares pulled regional stock markets higher on Thursday after OPEC members agreed to curb output in a surprise deal, though investors were wary of chasing markets higher as the U.S. presidential election neared.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.9 percent by mid-morning, thanks to a bounce in energy shares, but other markets such as Hong Kong were trading near the day’s lows after an early jump.

Stocks in Europe were expected to open higher following Asia.

“Despite the favorable oil deal, foreign institutional investors are sticking to their favorite counters before the U.S. elections results as there is simply too much market uncertainty,” said Andrew Sullivan, managing director, sales trading at Halting International Securities Group in Hong Kong.

Japan’s Nikkei climbed 1.5 percent, after losing 1.3 percent the previous day. In Hong Kong, the benchmark index was up 0.5 percent with energy-related shares the biggest gainers.

Oil futures retreated in Asian trade as the market grew more skeptical of the deal, pondering how the group agreed to limit production and how OPEC would implement such a plan. [O/R]

“Investors and traders are skeptical – with good reason. More cynical traders are questioning the complete lack of detail, including the potentially problematic question of which nations will curtail production,” Michael McCarthy, chief market strategist at Sydney’s CM Markets, told Reuters.

Though OPEC’s first agreement to cut production since 2008 drove risky assets initially higher, the lack of detail made some investors wary.

Brent crude eased slightly after earlier climbing to a high of $49.09 when the market opened, its highest since Sept. 9. WTI crude edged lower to $46.99 a barrel, after first hitting $47.47, its highest since Sept. 8.

“I think the markets are still not fully convinced,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

Still, the jump in oil prices boosted risk assets and undermined the yen, which is often seen as a safe haven at times of economic stress.

The dollar rose 0.7 percent to 101.38 yen, extending its rebound from one-month low of 100.085 touched on Tuesday.

The euro was higher at $1.12305, recovering from Wednesday’s low of $1.1182 helped in part by rebound in shares of Deutsche Bank.

($1 = 7.7538 Hong Kong dollars)

(Additional reporting by Keith Wallis in SINGAPORE and Hideyuki Sano in TOKYO; Editing by Eric Meijer and Kim Coghill)

China likes to stockpile crude oil whenever prices are at $50 or lower

 

It’s certainly something the Chinese have adopted when it comes to crude oil market, or at least the first half of the statement.

Just have a look at the chart below from Barclays as evidence. It shows Chinese crude stocking, based on the average daily build seen in recent years.

barclays china crude restocking v price yearly average Business Insider Australia

It’s easy to see the relationship. As the average Brent crude price has fallen since 2014, Chinese restocking has surged, jackknifing higher in 2016.

“The latest data released for China show the nation’s implied crude stock building rate accelerating to 1.1 mb/d [million barrels per day] for the month of August,” said Miswin Mahesh and Michael Cohen, commodity analysts at Barclays.

“The stocking rate is higher than the year-to-July rate of 780 kb/d, and the 440 kb/d averaged over June and July. The jump in August is a result of teapot refineries re-stocking, refinery maintenance, completion of storage facilities as well as the low oil price environment.”

“Teapots”, as they are are known, are independent oil refineries operating in the country, and account for around 20% of China’s refining capacity.

On the last factor — cost — Mahesh and Cohen found that the pace of inventory restocking is strongly linked to Brent prices, both from a monthly and yearly perspective.

“Since the price fall in 2014, China’s implied crude stock build has increased significantly. On a monthly basis, it appears that $50/bbl Brent is a key price level, below which implied crude build tends to remain at elevated levels,” they say.

This chart from Barclays plots monthly changes in Chinese crude inventories versus changes in the average Brent price. It’s clear what levels the Chinese are buying at.

barclays china crude restocking v price Business Insider Australia

And Mahesh and Cohen believe stockpiling will continue as the government strives to meet its 2020 target of 90-100 days of net import cover, something that currently sits at just a third of that level, according to Barclays.

“We see crude oil stocking rates by China averaging at least 400 kb/d over Q4 2016 and 2017, and our analysis suggests that the pace of China’s stocking activity will be linked to the price of oil rather than the completion dates of its Strategic Petroleum Reserve (SPR) sites,” they wrote.

Algeria urges OPEC decision to stabilise crude oil prices

Algeria’s cordial ties with OPEC members may mean it is well-placed to push for deal

Algerian Energy Minister Noureddine Boutarfa gives news conference on Sunday in Algiers on eve of three-day International Energy Forum and informal meeting of OPEC ministers
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The world’s top oil producers “must take a decision” to stabilise prices, Algeria’s energy minister said on Sunday ahead of an OPEC meeting on Wednesday in Algiers.

Oil prices are already depressed after two years of oversupply amid deep disagreements between members of the Organization of Petroleum Exporting Countries.

Failing to agree on a production freeze could push prices even lower, Noureddine Boutarfa told reporters in Algiers.

“Every state in the organisation agrees on the need to stabilise prices, it just remains for us to find a format that pleases everyone,” he said.

“The best solution would be a (production) freeze”, he said.

Oil prices collapsed from peaks of more than $100 a barrel in mid-2014 to near 13-year lows of less than $30 in January.

As a result, OPEC members are losing between $300m and $500m a day, Boutarfa said.

“No (oil) company will be able to withstand it if prices remain under $50 a barrel,” he said.

Hopes of a deal to limit production pushed prices above $46 a barrel last week, but they slid to $44.48 on Friday as investors’ optimism waned.

Venezuela and Iraq, which have been hard-hit by low prices, support the idea of a production freeze to boost prices.

But an attempt in April to reach a deal, led by OPEC linchpin Saudi Arabia, fell apart when its political rival Iran refused to play ball.

Iran said it needed to bring its production back up to the level it enjoyed prior to Western sanctions over its nuclear programme that have since been lifted.

Algeria’s cordial ties with OPEC members across the board mean it is well-placed to push for a deal.

“We are able to bring together states with political differences around a single table,” Boutarfa said.

OPEC’s 12 member states produce about a third of the world’s oil, and their production decisions have a global impact on prices.

Boutarfa said Wednesday’s summit would be a “first step” towards stability in the market.

“The Algiers meeting will not fail,” he said.

“Either we reach an agreement, which would be good, or we reach an understanding on the elements of an agreement, and that would also be good.”

Oil price rally sparked by U.S. rate decision enters second day

cropped-Energy-Oil-drilling-untitled.png

– UPI.com

By Daniel J. Graeber

Crude oil riding the Yellen train

At least one analyst not buying the rhetoric as Russia shoots down talks of a production cut.

NEW YORK, Sept. 22 (UPI) — Crude oil prices moved higher in early Thursday trading after strong labor data from the United States lent support to a possible rate hike later this year.

U.S. Federal Reserve Chair Janet Yellen said economic growth in the United States was subdued during the first half of the year, but gains in household spending stimulated growth since then.

“Business investment, however, remains soft, both in the energy sector and more broadly,” she said in opening remarks Wednesday afternoon. “The energy industry has been hard hit by the drop in oil prices since mid-2014, and investment in that sector continued to contract through the first half of the year. However, drilling is now showing signs of stabilizing.”

Nevertheless, with steady gains in exploration and production activity offering an indication that the market may have hit bottom, Yellen said that, while rates would be left alone, the economy is expected to expand. Economic data over the past few weeks show pressures on the U.S. economy remain, though recent trends in employment add support to the possibility of a rate increase later this year.

The U.S. Labor Department reported first-time claims for unemployment declined by 8,000 last week to a seasonally adjusted 252,000, the lowest level since July. The less-volatile four-week average declined 2,250 to 258,500.

Crude oil prices extended a rally sparked by Yellen’s comments into early Thursday trading. The price for Brent crude oil moved higher by 1.9 percent to start the day at $47.73 per barrel. The U.S. benchmark price, West Texas Intermediate, gained 2.4 percent to open the day in New York at $46.41 per barrel.

The price movement is in contrast to trends in production. Russia’s deputy energy minister sparked a news media frenzy early Thursday when he said a cut in output was technically possible, though Energy Minister Alexander Novak corrected him later to say there were no proposals to curb production.

In a statement on strategy, French energy company Total said its production was on pace for an average increase of 5 percent through 2019, with more than a dozen new start-ups on the schedule. Libya and Nigeria, two members of the Organization of Petroleum Exporting Countries, are both on the cusp of recovery.

Ministers from OPEC and non-member states could review proposals to keep production rates steady at meetings next week in Algeria. In no uncertain terms, Olivier Jakob, the managing director at Swiss oil-market research group Petromatrix, said in an emailed statement that he was calling the bluff of both the U.S. Federal Reserve and OPEC ministers.

“The U.S. Fed is all about talk and no action and the crude oil market can now speculate for the next two days if the same will characterize the upcoming meeting of OPEC members in Algeria,” he said.

US oil settles at $45.34 a barrel

US oil settles at $45.34 a barrel, up $1.29, or 2.39%

OPEC Iraq

Oil prices were up as much as 3 percent on Wednesday after a surprise drop in crude stockpiles reported by the U.S. government, marking a third weekly decline in the closely watched data.

Prices were slightly higher after the Federal Reserve said it would leave interest rates unchanged. The dollar fell after the announcement, making dollar-denominated commodities, such as crude oil, more affordable to holders of other currencies.

Brent crude futures were up 99 cents, or 2.16 percent at $46.87 per barrel by 2:40 p.m. ET, while U.S. West Texas Intermediate (WTI) crude futures climbed $1.28, or 2.91 percent, to $45.33 a barrel.

The U.S. Energy Information Administration (EIA) said domestic crude inventories fell by 6.2 million barrels for the week ended Sept. 16, versus a 3.4 million-barrel drop forecast by oil market analysts polled by Reuters.

Crude stocks in the world’s largest oil consumer have fallen since this month began. Some 14.5 million barrels were reported drawn for the week ended Sept. 2, the biggest weekly drop in 15 years after a tropical storm that slowed the arrival of oil imports in the U.S. Gulf Coast. In the subsequent week to Sept. 9, there was another decline of 559,000 barrels.

Crude inventories down 6.2M barrels

Crude inventories down 6.2M barrels   

While the draws have put a bullish face of sorts on oil, they also contrast with surging production from OPEC and other major producers such as Russia, causing a swing in crude prices lately.

“We are still very well supplied for this time of year,” said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York.

Some market participants were puzzled by the U.S. crude draw when imports as a whole rose and refinery runs fell.

U.S. crude imports rose last week by 77,000 barrels per day, but the rate dropped sharply in the U.S. Gulf, falling about 500,000 bpd to 2.9 million bpd, close to the record low of 2.5 million bpd hit in the week to Sept. 2 when the storm disrupted supplies.

Refinery crude runs fell 143,000 bpd as utilization rates fell 0.9 percentage point but were still high at 92 percent of total capacity.

U.S. gasoline futures rose 2 percent after data showed stocks of the motor fuel fell 3.2 million barrels nationwide, compared with analysts’ expectations for a 567,000-barrel drop.

That contrasted with record builds in the Gulf Coast and record draws in the East Coast, amid a near two-week outage on a key gasoline line that runs from the refining hub in the south to northeast. The line was to reopen on Wednesday.

“The Colonial pipeline mess is evident in the gasoline data, which showed supplies stranded in the Gulf and drawn down in the East. We will have to see if the trends normalize next week,” said John Kilduff, partner at New York energy hedge fund Again Capital in New York.

: CEO

OPEC is a toothless tiger: Expert   

Adding to the upward price momentum was an oil service workers strike in Norway that could impact output from western Europe’s biggest crude producing region.

Key for the market is next week’s meeting in Algeria between producers from the Organization of the Petroleum Exporting Countries (OPEC) and Russia to discuss measures to rein in oversupply, including an output freeze at current levels, but analysts said they did not expect significant results.

“Even with a freeze — which would still mean OPEC production is at record levels — we will still be in an oversupplied market,” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.

Oil prices initially fell in the previous session on pessimism that OPEC members and other major crude producers will reach an output freeze deal during Sept. 26-28 informal talks in Algeria. Saudi Arabia, Iran, Iraq, Nigeria and Libya, five of OPEC’s largest oil exporters, have all raised or been trying to hike output in recent months even while talking of a freeze.

But at midday, short-covering and fresh buying emerged from traders who feared a rally if OPEC announce a deal in Algeria.

OPEC Secretary-General Mohammed Barkindo said he expected the potential freeze deal between OPEC and other producers to freeze output to last one year, longer than previously thought.