Promise of Iran/Iraq Cooperation in OPEC Cutback Deal Causes 3 Week Market Highs

Bijan Namdar Zanganeh, oil minister for Iran, belives it's "highly probable" OPEC will reach a consensus in Vienna

Posting the highest closes since October 28, Brent on Monday climbed $2.04 to $48.90 per barrel and West Texas Intermediate climbed $1.80 to $47.49 on the strength of Iran's optimism that the Organization of the Petroleum Exporting Countries' (OPEC) will agree to a supply-cut deal and Iraq stating it will offer new proposals to bolster unity before next week's ratification meeting.

Fears over Iran's determination to boost production and Iraq's demand for an exemption were assuaged somewhat with Bijan Namdar Zanganeh, oil minister for Iran, saying on Monday that it's "highly probable" OPEC will reach a consensus in Vienna, and Jabbar Al-Luaibi, oil minister for Iraq, saying he will offer plans to help reach an agreement - even though he did not comment on what these plans would consist of.

They made these statements at the end of a two-day meeting to nail down details of the proposed cut to output, an event Mohamed Oun, Libyan OPEC governor, said went well: "We are discussing; we are not disagreeing."

Mike Wittner, head of oil-market research at Societe Generale SA, pointed out that, "This could turn on a dime, but for now the noise is positive and points to a deal."

Phillip Streible, senior market strategist at RJO Futures, urged Bloomberg to "remember that the deals have always fallen apart in the past," but he conceded that Russia increasingly seems to be behind ratification, and that the oil price rally is occurring despite headwinds such as the strengthening U.S. dollar.

He predicts oil rising to $50 next week when OPEC members convene in Vienna, but he doesn't see it climbing much higher than that due to the likelihood of the U.S. federal government raising rates "and curbing optimism."