On news of a possible output freeze by Russia and Saudi Arabia, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained 3.5% on Tuesday as oil prices rose to their highest levels of 2016.
That extends USO’s one-week gain to 13%, but that is not stopping some oil market observers from saying the worst might just be over for the commodity. USO and rival oil-related exchange traded products got a lift after Russia and Saudi Arabia have reached a consensus to hold production steady ahead of an Organization of Petroleum Exporting Countries meeting in Doha, Qatar on Sunday to discuss a freeze in output, Reuters reports.
Senior Iraqi oil official Falah Alamri was was confident the Doha meeting would result in an output freeze, which would signal that prices have bottomed. Saudi Arabia is the largest OPEC producer while Russia is believed to be the largest oil and natural gas producer that is not an OPEC member.
“The oil market is at the beginning of a multiyear bull run, with prices rising to $60 later this year and $80 in 2017, said Pierre Andurand, the chief investment officer of London-based hedge fund Andurand Capital Management LLP,” reports Bloomberg.
Iran, which is just coming off a years of a sanctions and embargo, has been left out of the oil market and is just beginning to ramp up production for global sale. The Middle East country maintained that it will not contribute to any output freeze until its crude exports hit pre-sanction levels.[related_stories]