Oil futures rallied to their highest settlement of 2016 on speculation that Saudi Arabia and Russia have reached a deal to stabilize production ahead of an OPEC meeting in Qatar this weekend.
Adding further support to prices, a U.S. government agency cut its forecast on domestic crude output for this year and next, according to Bloomberg MarketWatch.
West Texas Intermediate crude for May delivery jumped $1.81, or 4.5%, to settle at $42.17 a barrel. That marked the best settlement of the year for a most active contract.
June Brent oil, the global benchmark, added $1.86, or 4.3%, to $44.69 a barrel on London’s ICE Futures Exchange, which is also a 2016 high.
Interfax, a news provider covering emerging markets, reported that Saudi Arabia and Russia have reached a consensus to freeze oil production.
It has been 15 years since OPEC and non-OPEC countries have agreed to work together on production.
For nearly two months, oil prices have been volatile as the market tries to gauge the likelihood of a concerted effort by major oil producing countries tighten supply. The mention of a meeting back in February stoked a buying spree but prices dove when Saudi Arabia, one of the original initiators of the pact, later showed reluctance to participate in the agreement unless Iran pledges to do so.
Iran has repeatedly showed no interest in a production freeze at the current level, saying it would keep pumping until production reaches the pre-sanction level of around 4 million barrels a day.
Oil output from Iran in March climbed by 110,000 barrels a day to 3.23 million barrels a day.
West Texas Intermediate oil prices have gained more than 13% to date.
In a monthly report Tuesday, the U.S. Energy Information Administration raised its price forecasts on West Texas Intermediate and Brent crude and cut its U.S. oil output estimates for this year and next.
But the market’s attention isn’t just on the oil production and the coming meeting.
The American Petroleum Institute will release its weekly report on U.S. petroleum supplies late Tuesday, while the EIA issues its own figures Wednesday morning.
May natural gas ended at $2.004 per million British thermal units, up 9.2 cents, or 4.8%, after posting losses over the past two sessions.
