Oil reversed course and rose as much as 2% on Nov. 29 after industry sources said Russia accepted the need to cut production with OPEC ahead of its meeting next week.
Prices in November were down nearly 22 % so far, set for the biggest monthly fall since the depths of the financial crisis in 2008.
A steady rise in crude supply from the United States, now the world’s top producer, has pressured prices along with Saudi Arabia’s insistence that it will not cut output on its own to stabilize the market. Brent crude slid early to another 2018 low below $58 per barrel.
Prices rebounded after sources said Russia would consider joining an effort to cut output along with Saudi Arabia and other members of OPEC.
The Russian Energy Ministry held a meeting with the heads of domestic oil producers on Nov. 27 before a gathering in Vienna of OPEC and its allies on Dec. 6-7.
“The idea at the meeting was that Russia needs to reduce. The key question is how quickly and by how much,” said one source familiar with the talks between Russian oil firms and the ministry.
The market now expects that a cut of 1 million barrels per day (MMbbl/d) would be possible from OPEC and its allies, said John Kilduff, partner at Again Capital in New York.
Brent crude futures rose 75 cents, or 1.3%, to settle at $59.51 per barrel, after touching an intraday high of $60.37 per barrel. U.S. crude futures rose $1.16, or 2.3%, to $51.45 per barrel, having hit a high of $52.20.
Oil retreated from session highs after the U.S. Federal Reserve released minutes of the latest policy meeting showing interest rate hikes are expected soon. The dollar index edged higher against a basket of currencies, pressuring prices of dollar-denominated oil.
Russian President Vladimir Putin, whose country is the world’s second biggest oil producer, said on Nov. 28 he was in touch with OPEC and ready to continue cooperation on supply if needed, but was satisfied with an oil price of $60.
U.S. crude inventories hit their highest in a year, and are now only 80 MMbbl below March 2017's record 535 MMbbl, according to the Energy Information Administration.
U.S. stockpiles were expected to build again in the latest week, traders said, citing data from energy information service Genscape. Crude stockpiles at the Cushing, Oklahoma, hub rose 771,924 barrels since Nov. 23, traders said on Nov. 29, citing a weekly Genscape report.
U.S. oil reserves in 2017 exceeded a 47-year-old record when they increased 6.4 billion barrels (Bbbl), or 19.5%, to 39.2 Bbbl, the government said.
Investors are looking ahead to the meeting of leaders of the Group of 20 nations (G20), the world’s biggest economies, on Nov. 30 and Dec. 1, with the U.S.-China trade war in focus.
“We have seen huge increases in supply and the demand picture is in question. However, we might see some movement on global trade issues at the G20 meeting which starts on Friday,” said Michael McCarthy, chief strategist at CMC Markets and Stockbroking.
Anticipation of the meeting may also be driving prices higher, said Kilduff of Again Capital, adding that traders are wary of being short ahead of the meeting.