Oil turned positive on Monday on increasing hopes that the commodity market would stabilized. The renewed hopes came on the backdrop of Saudi Arabia seemingly changing its mind once again on oil output, at least according to market perceptions. The Saudis are regarded as the kingpin of OPEC, and the kingdom once again expressed its willingness to work with other oil producing nations to help stabilize the market. What this means practically is the question.
As the stock market was struggling for want of direction due to economic ambiguity, the recovery in the commodities was viewed as positive.
Hopes Of Bottoming Out
Saudi Arabia’s move could also be viewed as a factor that might result in oil bottoming out though skeptics continued to believe that the excess supply might continue to drag down prices in the near-term. However, after hitting below $30 a barrel on February 11, the commodity has advanced 17%. It is still trading at a deep discount compared to the $115 per barrel witnessed in 2014.
On Monday, Brent Futures were trading up 44 cents at $35.54 per barrel in the morning. United States crude futures were up by 17 cents to $32.95 per barrel. According to a Reuters monthly poll, oil prices may climb modestly above $40 per barrel this year.
Iran Increases Exports
It is not clear as to how Saudi Arabia will face the situation of Iran boosting its exports. Right from the beginning of the negotiations on freezing oil production at January levels, Iran was not in favor of it at all since it started exporting only very recently after sanctions against it were lifted. The Islamic Republic may continue to hold its stand irrespective of the stands taken by different nations in the Middle-East. On Monday, the country indicated higher exports from the preceding month as exports jumped 1.75 million barrels a day.
Interestingly, InterContinental Exchange data indicated that investors were betting on increasing oil prices with their futures and options contract. The exchange started recording data in 2011 and since then it is the first time that more investors were expecting higher prices.