(Bloomberg) -- Oil capped the biggest three-day gain in 25 years after OPEC said it’s ready to talk to other global producers to achieve ‘fair prices’ and the U.S. government reduced its crude output estimates.
Crude traded in New York surged 27 percent in three days, the most since August 1990 when Iraq invaded Kuwait. Both West Texas Intermediate and Brent benchmarks have climbed more than 20 percent from their closing low on Aug. 24, meeting the common definition of a bull market. The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s supply, said in a monthly publication it’s willing to talk, “but this has to be on a level playing field.”
Prices erased last week’s drop to a six-year low as the OPEC comments and signs that the U.S. shale boom is fading faster provided optimism that a global supply glut will evaporate sooner than estimated. A measure of oil-price fluctuations rose to a five-month high as traders sought protection from market swings.
“The market turned around on two pieces of news,” Phil Flynn, senior market analyst for Price Futures Group Inc. in Chicago, said by phone. "The EIA cut its U.S. output estimates and OPEC says its ready to talk to others about cutting output."
WTI for October delivery surged $3.98, or 8.8 percent, to close at $49.20 a barrel on the New York Mercantile Exchange. It was the highest settlement since July 21. Prices slipped as much as $1.62 to $43.60 earlier. Volume was almost double the 100-day average.
Brent for October settlement rose $4.10, or 8.2 percent, to end the session at $54.15 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since July 24. Prices have climbed 26 percent in three days, also the most since August 1990. The European benchmark crude closed at a $4.95 premium to WTI.
"It’s a bungee cord market," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. "This shows that there were some bears waiting for any reason to jump back in."
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