OPEC signaled that it might cut production in the future and the U.S. lowered output estimates, propelling oil back into a bull market less than a week after hitting a six-year low.
Prices surged 8.8 percent Monday in New York, capping the biggest three-day gain in 25 years.
The Energy Information Administration changed the way it calculates how much oil comes out of the ground, using a survey of producers in key states instead of relying on data from state agencies and computer models. As a result, 13.2 million barrels of oil production vanished with a government blog post.
The Organization of Petroleum Exporting Countries, producer of about 40 percent of the world’s oil, renewed its commitment to talk to other crude exporters to achieve “fair and reasonable prices,” according to the group’s monthly magazine. OPEC won’t prop up oil prices by cutting supply unless non-member nations agree to share the burden, according to the bulletin.
So is the glut over? Depends on who you ask.
Phil Verleger, president of the economic consulting company PKVerleger LLC, said the global market could be rebalanced as soon as early next year after the U.S. revisions.
The bullish headlines, combined with money managers holding bearish bets that are nearly triple the average over the past 10 years, led to what could be a short-lived rally, warned Ed Morse, the head of global commodity research at Citigroup Inc.
It’s too early to fully trust the EIA’s new data, he said in a research note, and there’s no reason to believe any non-OPEC countries will work with the group to cut production. Russian production has remained high because the weak ruble has lowered costs there, while Mexico is trying to increase output amid a historic energy reform.
For some analysts, it all comes down to Saudi Arabia, OPEC’s biggest producer. The Saudis led the way in maintaining production levels in order to preserve market share, even as prices sank by more than half since the middle of last year.
“Until Saudi Arabia says something this is all meaningless,” Mike Wittner, head of oil-market research at Societe Generale SA in New York, said by phone. “Why would the Saudis change their logic and waste all they have already done.”