Oil rose to its highest since August above $50 a barrel on Monday, supported by a planned production cut by exporter club OPEC, although analysts cautioned the stubbornness of the existing supply overhang could temper a longer-lasting rally.
December Brent crude futures were last up 42 cents at $50.61 a barrel by 0913 GMT, off a session low of $49.74, while U.S. crude futures rose 37 cents to $48.61 a barrel, above the day’s low at $47.78.
The Organization of the Petroleum Exporting Countries said last week it would cut output to between 32.5 million barrels per day (bpd) and 33.0 million bpd from about 33.5 million bpd, with details to be finalised at its policy meeting in November.
Initial scepticism last week over the effectiveness of the deal in eroding the global surplus gave way to a wave of short-covering that drove the price above $50 a barrel for the first time since late August on Monday.
“The lukewarm response to the OPEC deal from analysts (rightfully so) probably attracted some premature selling, with technical traders currently in the driving seat. Oil always runs ahead of itself and this time round is no exception,” Saxo Bank manager Ole Hansen said, referring to the price rally.
OPEC’s oil output is likely to reach 33.60 million bpd in September from a revised 33.53 million bpd in August, its highest in recent history, a Reuters survey found on Friday.
“Sentiment has been slightly dented by a Reuters survey Friday, showing that despite agreeing to cut production OPEC pumped crude in record amounts through September,” said Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore