Oil prices rallied Monday as traders weighed continuing discussions on an output freeze by key crude producers in an oversupplied global market.
US benchmark West Texas Intermediate for delivery in March rose $1.84 to $31.48 a barrel on the New York Mercantile Exchange.
Brent North Sea crude for April delivery, the European oil benchmark, advanced $1.68 to $34.69 a barrel in London.
Kyle Cooper at IAF Advisors said there were “more and more discussions about what OPEC s going to do, what kind of supply levels we can expect from OPEC, so that s contributing to the rise here” in New York.
Muhammadu Buhari, the president of Nigeria, Africa s biggest oil producer, began a week-long visit to the Gulf on Monday stumping for relief from falling prices.
His trip started in OPEC kingpin Saudi Arabia, where he was to meet with King Salman bin Abdulaziz and senior Saudi officials.
Last week Saudi Arabia and non-OPEC member Russia, two of the world s three largest oil producers — the United States is the third — announced a deal to freeze output at January levels if other major producers followed suit.
Daniel Holder of Schneider Electric said there was market consensus that the agreement would not affect prices, because it would not cut supplies.
“However, there is a subtler conclusion from these meetings as well: The chance that Russia and Saudi Arabia can cooperate in this simple game bolsters the likelihood that the countries will cooperate on The Cut, ” Holder said in a client note.
New projections from the International Energy Agency on Monday also gave markets a lift.
The IEA forecast US shale production would drop through 2017 before a gradual recovery in oil prices would push up production again.
“Although traders may be buying on the (US shale) news, we note that the view that falling US drilling rig counts would translate into a drop in output has been in wide circulation for more than 12 months and so this latest report is really just recycling this established theme,” said Tim Evans of Citi Futures.