U.S. crude closed at nearly a three-month high after a new U.S. forecast showed tighter oil supplies next year, while Russia, Saudi Arabia and other big producers hinted at further talks to support the market.
Global crude benchmark Brent returned to above $50 a barrel, breaking range-bound trades since early September that have largely seen the market trade in a $5 band.
A weakening dollar added support for oil, as did bets that the U.S. oil rig count could tumble again this week after last week’s unexpectedly sharp decline of 26 rigs.
U.S. benchmark West Texas Intermediate crude settled up $2.27, or 4.91 percent, at $48.53 a barrel — its highest close since Sept. 16.
Brent crude, the global oil benchmark, rose $2.50, or 5.2 percent, to $51.80 a barrel, after rising as high as $51.99, it’s strongest level since Sept. 3.
Traders also cited technical buying for Brent at above $50 a barrel as it headed for its first three-day gain in a stretch after Monday’s rise of more than 2 percent and Friday’s climb of nearly 1 percent.
“We have reduced the probability of a return to the $37-38 area per nearby WTI,” said Jim Ritterbusch of oil consultancy Ritterbusch & Associates in North Wabash, Chicago. “We will maintain a long standing view that price declines below this support level are virtually off of the table.”
Global oil demand will grow by the most in six years in 2016 while non-OPEC supply stalls, according to a monthly U.S. energy report that suggests a surplus of crude is easing more quickly than expected.
Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, the U.S. Energy Information Administration said in its Short-Term Energy Outlook.
Demand is expected to rise 270,00 bpd to 95.2 million barrels a day, up 0.3 percent from September’s forecast due in part to an outlook for stronger demand growth from China.
Russia’s energy minister said Russia and Saudi Arabia had discussed the oil market in a meeting last week and would continue to consult each other.
“The market is possibly moving on speculation that OPEC and non-OPEC countries will find an agreement to cooperate,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
OPEC Secretary-General Abdullah al-Badri said at a conference in London that OPEC and non-OPEC members should work together to reduce the global supply glut.
“There is one problem we are facing: the overhang,” Badri said, adding there were already signs of higher crude demand and of a drop in supply growth from non-OPEC members.
Iran’s chief negotiator for new oil contracts told the conference the country will introduce more than 50 exploration and production projects to investors in the near future.
Iran’s crude oil sales were on track to slip to the lowest in seven months as its main Asian customers were buying less than before.
The drop counters expectations that Iran’s crude supplies to the global market will rise sharply once nuclear-related sanctions against the country are lifted.