Crude prices rose as much as 1 percent on Monday after Saudi Arabia's pledge to work on price stability offset some worries about the global oil market glut. A rally in gasoline and ultralow sulfur diesel (ULSD) futures also bolstered the petroleum complex. Traders bought those refined products amid strong demand for gasoline at pumps and the onset of colder weather in North-eastern United States, which should boost demand for heating oil, or ULSD.
Earlier in the session, a broader commodities selloff led by copper and firmer dollar had weighed on oil. Saudi Arabia said in a statement it was ready to work with other oil producing and exporting countries to stabilise prices. The Saudi remarks came as oil prices barely held above 2-1/2-month lows, and were greeted with a mix of enthusiasm and skepticism. Despite similar pledges in the past, the Saudis and other big Opec producers have kept output high to maintain market share, and crude prices have dropped 50 percent over the past year.
Opec's next meeting to set production targets is on December 4. Benchmark Brent futures were up 45 cents, or 1 percent, at $45.11 a barrel by 1:35 pm EST (1835 GMT). It rose more than $1 on the Saudi statement, then surrendered those gains to trade $1 lower before rebounding. US crude's West Texas Intermediate (WTI) futures rose 16 cents, or 0.4 percent, to $42.06 a barrel.
"The Saudis' past promises on working for price stability has led to nothing, so it wasn't surprising there was as much disbelief as initial excitement over today's announcement," said John Kilduff, partner at New York energy hedge fund Again Capital. "But all said, they are the biggest movers in Opec, so their statement is having a positive impact." Gasoline futures jumped nearly 3 percent, the most in nearly three weeks. ULSD rose almost 2 percent. Some remained unconvinced the rebound in oil would last, pointing to the widening discount in nearby WTI versus farther-dated contracts.
"The dramatic expansion in the WTI carrying charges since early last month will remain as a major bearish portent that will be keeping alive a test of the late August WTI lows," said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates. WTI's front-month fell to $38.99 a barrel on Friday, trading barely above its August 27 low of $37.75. Hedge funds and other big speculators have cut bullish wagers on WTI to the lowest since August.