Oil prices jumped as much as 5 percent on Tuesday, bouncing back from multi-month lows on renewed expectations that Opec will agree later this month to cut production to reduce a supply glut that has weighed on prices for more than two years.
Saudi Energy Minister Khalid al-Falih is expected to travel to the Qatari capital, Doha, this week for meetings with oil-producing countries on the sidelines of an energy forum, sources familiar with the matter told Reuters.
The Organisation of the Petroleum Exporting Countries is due to meet on November 30 to hammer out the terms of a deal to limit output. An outline deal was reached in September but negotiations on the detail are proving difficult, officials say. Traders and analysts also pointed to a report from Monday about a last ditch effort by Opec to bring the world's top producers together to rein in production, saying it triggered a wave of short covering. "Clearly the market is now seeing increased chances of an Opec production cut," Commerzbank analysts said in a note.
"There is doubtless considerable pressure to take action, as the oversupply will not reduce itself." By 11:46 am EST (16:46 GMT), Brent futures rose $1.88, or 4.2 percent, to $46.31 a barrel, after reaching a session high of $46.41. US crude rose $1.99 to $45.31 per barrel, a 4.6 percent gain, after hitting $45.42. Prices were on track for their biggest daily percentage gain since September 28.
Brent hit a three-month low of $43.57 on Monday while US crude also dropped to a three-month low of $42.20 in the previous session. News of an attack on a major oil pipeline in Nigeria, the Nembe Creek Trunk Line in the southern Niger Delta, gave an additional push to prices. Technical analysts said oil markets were due an upward correction after a month of declines.
"The current active contract (for US crude) is expiring. The last trading day is next Monday, so some oil traders are already starting to close out their positions to roll over," Philips Futures investment analyst Jonathan Chan in Singapore said.
But rising Libyan oil production could cap gains. A tanker carrying the first freshly produced cargo of Libyan crude to be exported since the Ras Lanuf terminal reopened in September left the port on Monday. Libya's oil production has almost doubled to around 600,000 barrels per day in recent weeks.