Feeding-frenzy mentality takes hold on Wall Street as traders rush in on oil amid building support for an OPEC production agreement. File photo by Monika Graff/UPI | License Photo
NEW YORK, Nov. 21 (UPI) -- Crude oil prices opened the shortened trading week in rally mode as leaders from major oil-producing nations expressed support for a production proposal.
Members of the Organization of Petroleum Exporting Countries are working to build consensus around an agreement to hold output at around 32.5 million barrels per day, the low end of a proposal offered from Algeria in September. Non-member states like Russia may play a role as production rates from OPEC area already above even the high end of what was proposed.
Speaking from the sidelines of an economic summit in Peru, Russian President Vladimir Putin said his country was ready to do its part to make sure any agreement sticks.
"We will do everything our OPEC partners expect of us," he said.
Iran's oil minister offered similar support during the weekend when meeting with OPEC's secretary general in Tehran.
The price for oil rallied sharply at the start of trading Monday. Brent crude oil was up 2.8 percent to open the day in New York at $48.17 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, was 2.7 percent higher than the previous close to start the trading day at $47.60 per barrel.
Both Russia and Iran are already producing oil at or near record levels. OPEC last reported that its 14 members produced a combined average of 33.6 million barrels per day, an increase of 240,000 bpd from the previous month. That means a cut, not a freeze, would be necessary to implement the agreement offered by OPEC in Algeria
A research note published Monday by Goldman Sachs said that economic conditions were supportive of an OPEC agreement. If all parties to the proposal agree during formal talks at the end of the month, Goldman said it would do more to reduce volatility for crude oil prices than support a durable price increase.
"As a result, we are not changing our 2017 WTI price forecast of $52.50 per barrel, we are just shifting the upside from late next year to the near-term, and moving some downside into late next year," the note read.