Oil prices rose to the highest level of the year Tuesday on increased expectations that major oil producers will agree to freeze output when they meet on Sunday.
The global oil market remains overstocked close to two years after prices began plunging in mid-2014. While production has started to fall in some regions due to spending cuts, especially in U.S. shale-oil regions, global output continues to outpace demand.
Major OPEC and non-OPEC oil producers will meet in Doha, Qatar, on Sunday to discuss freezing production. Some investors see this as an indication of a cut in output later in the year, while others say that freezing production at levels that are already high will do little to assuage the global glut of crude.
Russia and Saudi Arabia In, Iran Out
Russia and Saudi Arabia are cited as having agreed to a deal while Iran says it would continue to pump until production reaches the level it was at before sanctions were put in place, a level of around four million barrels a day.
According to Michael Tran, director of energy strategy at RBC Capital Markets, “The fact that Russia’s at the table now is really quite key here, because it’s a big change in rhetoric from last year. For oil prices, I do think the lows of the year are in.”
Light, sweet crude for May delivery settled up $1.81, or 4.5%, to $42.17 a barrel on the New York Mercantile Exchange on Tuesday, the highest settlement since November.
The U.S. oil benchmark settled above its 200-day moving average for the first time since 2014, when prices were above $100 a barrel. Analysts indicate that this is a key bullish signal for traders who rely on chart-based numbers.