Oil Price extended its gains on Monday as more optimistic sentiment signaled that OPEC will agree to cut oil production in the members meeting new week in Vienna. Global crude benchmark Brent for January deliveries rose as much as 3.39 percent to $48.45 a barrel on the London-based ICE Futures Europe exchange. The contract had gain 4.7 percent last week. While its U.S. counterpart West Texas Intermediate for December delivery jumped 3.5 percent to $47.28 a barrel on the New York Mercantile Exchange.
Investors now are expecting the Organization of the Petroleum Exporting Countries’ will propose production cuts next week after Iraq said it will make new proposals at the meeting to help reach an agreement. Russian President Vladimir Putin also said he saw no obstacle to non-OPEC member Russia agreeing to freeze oil output.
“We still expect OPEC to agree to a face-saving statement. It would showcase agreement, provide flexibility, and not veer too far from what countries had planned initially for [the first half of 2017],” said Barclays.
The big banks now see higher probability of cutting output at the end of this year and raise the target price of oil. Goldman Sachs expect WTI to be $55 a barrel in both the first and second quarter. “For the purpose of our oil-price forecast, our base case is now that an OPEC production cut will be announced and implemented with OPEC production at 33 million barrels a day” the bank said.
“Market players are positioning themselves for higher prices, and oil will be in the $50 to $55 range if there is a deal,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “OPEC members are building a lot of expectations and taking too much exposure to let a deal fail.”