Brent crude and WTI: Oil climbs even higher amid rising optimism over freeze meeting

 
Jessica Morris
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Investors are eyeing a meeting in Doha (Source: Getty)

Oil prices burst into life this afternoon, extending earlier gains after a report suggested Russia and Saudi Arabia have agreed to freeze output ahead of a widely anticipated meeting in Doha on Sunday.

Russia's Interfax news agency quoted a diplomatic source in Doha saying the two countries had reached a consensus about an output freeze today, and that the final deal wouldn't depend on Opec rebel Iran.

Nevertheless, analysts and traders remained sceptical about the potential freeze deal's ability to balance global oil markets - especially in the absence of Iran which has vowed to return oil output to pre-sanction levels.

Read more: Where big banks think the oil price is heading next

"The market appears to be taking a lot of support from positive statements. But, this isn't the first time the Russians have come out and made remarks related to a production freeze being imminent," said Gene McGillian, a senior analyst at Tradition Energy.

Brent crude, the global benchmark, rose 2.9 per cent to $44.1 per barrel in late afternoon trading, taking it further above a 2016 high hit earlier in the day.

Meanwhile, West Texas Intermediate crude, the US benchmark, added 2.7 per cent to $41.5, just shy of $41.58, its highest level since 22 March.

"The weak dollar is one important reason," Eugen Weinberg, an analyst at Commerzbank, said.

The weak greenback boosts demand by making dollar-denominated oil cheaper to buy using a foreign currency.

Read more: These are the "fragile five" Opec members that could collapse if oil prices don't stabilise

Higher vehicle sales in China signalled rising demand for gasoline there, while a plan by thousands of oil and gas workers in Kuwait to go on strike from Sunday also provided support.

"If it is not clear if the strike will last long and will have any meaningful impact on exports or domestic production (including refineries), it does illustrate further the amount of pain that (Gulf) oil producers are also facing at current price levels," said Olivier Jakob, analyst at Petromatrix.

Oil prices have collapsed from above $100 in the middle of 2014 due to oversupply.

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