Oil prices surged dramatically in the last two weeks thanks to OPEC freeze talk, but there's little expectation the cartel will act, especially now that crude is trading 24 percent higher just on hot air.
Oil, up nearly 9 percent this week alone, has raced higher since West Texas Intermediate crude futures dipped below $40 per barrel in early August. In just 16 days, oil futures are approaching $50 with Brent hitting more than $51 a barrel, buoyed by rumors of production deal and bullish supply data before settling at $48.52 per barrel Friday.
The latest jumps added two to three per cent to the benchmarks compared to Wednesday and left them both around 22 per cent above the low reached earlier this month.
Oil Sees ‘Bull Run’
Analysts see both Brent and WTI as being officially in a "bull market" run, nearing two-month highs after falling into a "bear market" last month. Forecasters say oil could drop from its highs, but investors seem to be building new long positions, offsetting a major short position, which has been whittled away from record levels by short covering.
Not all experts agree that prices will remain strong. A previous proposal to cap production collapsed in April and OPEC member Iran has hinted it may again hold out as it returns from international sanctions.
According to one market analyst at Forex, “Some believe - or more appropriately, hope - that may come up with a plan to support prices at its informal meeting next month, something which we doubt will happen."
OPEC's biggest producer Saudi Arabia, however, confirmed last week that it was ready to discuss actions if prices remain low, giving a sense credibility to the talks. Since the Saudis officially joined in, oil has risen more than 15 percent.