OPEC, the producer of 40 percent of the world's oil, said Monday that it is ready to talk to other crude exporters to achieve "fair and reasonable prices," according to the group's monthly magazine.
Oil prices jumped after the report was published and after the U.S. reduced its crude production estimates.
West Texas Intermediate crude for October delivery surged $3.98, or 8.8 percent, to close Monday at $49.20 a barrel on the New York Mercantile Exchange. Brent crude, the benchmark for more than half the world's oil, rose $4.10, or 8.2 percent, to end the session at $54.15 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since July 24.
Crude traded in New York has surged 27 percent in three days, the most since August 1990 when Iraq invaded Kuwait. The contract has climbed more than 20 percent from its closing low on Aug. 24, meeting the common definition of a bull market.
Crude prices sank to a six-year low in August as Saudi Arabia, the world's top exporter, led the 12-member Organization of the Petroleum Exporting Countries to reject demands from some of the other members such as Algeria and Venezuela to cut supply in order to prop up prices.
OPEC opted to maintain production in order to protect market share amid surging output from the U.S., Canada and other countries.
Low oil prices have been reflected in lower pump prices for gasoline. The average price of a gallon of regular gas in Arkansas on Monday was $2.18, down from $3.22 a year ago, according to AAA. The national average price Monday was $2.47.
"There is no quick fix, but if there is a willingness to face the oil industry's challenges together, then the prospects for the future have to be a lot better than what everyone involved in the industry has been experiencing over the past nine months or so," said the opening commentary in the OPEC Bulletin published on the group's website. "As the Organization has stressed on numerous occasions, it stands ready to talk to all other producers ... but this has to be on a level playing field."
OPEC stuck to its liberal production strategy at its last meeting on June 5, agreeing to keep its target at 30 million barrels a day but raising daily output in the past three months above 32 million barrels a day, the highest since 2012.
Output by OPEC members rose 108,000 barrels to 32.316 million a day in August, according to a Bloomberg survey of oil companies, producers and analysts. July's total was revised 101,000 barrels higher to 32.208 million a day, because of changes to the Iraqi estimate.
Prices weakened after fellow OPEC member Iran struck a deal in July with world powers on its nuclear program that would free up its oil exports.
Iranian production in August climbed by 50,000 barrels a day to 2.9 million, the highest since July 2012, when more sanctions were imposed on the Islamic republic to curb its nuclear program.
"The market share battle continues," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. "The increase in Iranian output is just the latest salvo in the battle."
Saudi Arabia, OPEC's top producer, reduced output by 70,000 barrels a day to 10.5 million in August, the biggest decline among cartel members.
The U.S. government on Monday reduced its crude production estimates by as much as 130,000 barrels a day for the first five months of the year based on results of a new survey.
The United States produced about 9.4 million barrels of crude a day during the first half of the year, according to the Energy Information Administration's website. That's on average about 87,000 barrels a day fewer than previously estimated, with March output getting the largest cut of 130,000. June production was 9.3 million, the least since January.
The new numbers come from direct surveys of energy companies in the 15 states that make up the bulk of U.S. energy production.
The biggest revision is in Texas, where output was 100,000 to 150,000 barrels a day fewer than previously reported, the Energy Information Administration said.
The revisions mean global crude supply and demand could rebalance faster than previously thought, said Phil Verleger, president of the economic consulting company PKVerleger. Crude prices are still down more than 50 percent from their peak in 2014 as supply has outpaced demand, causing producers to fill storage tanks with the excess.
"Two words: Glut gone," Verleger said. "If you extrapolate their production revisions over their forecasts, between that and the increase in gasoline consumption, the market should be back in balance early to middle of next year."
Information for this article was contributed by Maher Chmaytelli, Mark Shenk, Dan Murtaugh, Wael Mahdi, Colin McClelland, Pietro D. Pitts, Nathan Gill, Mohammed Aly Sergie, Tamim Elyan, Kadhim Ajrash, Julian Lee and Hashem Kalantari of Bloomberg News.
Business on 09/01/2015