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Oil Rises on Fresh Calls for Production Freeze

Oil received a boost on Monday from reports of renewed talks by some OPEC members to restrain output, but analysts warned the bearish fundamentals that brought prices to four-month lows last week still lurked in the background.

International benchmark Brent futures were trading at $44.77 per barrel in morning trading in Europe, up 50 cents, or 1.13 percent, from their last close.

A worker walks at Nahr Bin Umar oil field, north of Basra
A worker walks at Nahr Bin Umar oil field, north of Basra, Iraq December 21, 2015. REUTERS/Essam Al-Sudani

U.S. West Texas Intermediate crude futures were at $42.35 per barrel, up 55 cents, or 1.32 percent.

The rise came on the back of fresh calls by some members of the Organization of the Petroleum Exporting Countries to freeze production levels in a bid to rein in output that has consistently outpaced demand.

Qatar's energy minister also said on Monday that the oil market is on a path to rebalancing.

Still, Russia, the world's top oil producer and a non-OPEC member, was quick to dismiss calls for a freeze.

Russian Energy Minister Alexander Novak told reporters that "the position of Russia is that the prerequisites for this have not yet come to pass, considering that prices are still at a more or less normal level".

A glut of crude and refined products loomed over the market.

In China, July fuel exports rose over 50 percent from a year earlier to a monthly record 4.57 million tonnes, official data showed, as easing demand growth and a surplus in refined products pushed refiners to increase shipments overseas.

"It would be a surprise if we rapidly moved up to $60," Bjarne Schieldrop, chief commodities analyst with SEB in Oslo, said of Brent prices. "There's a lot of oil there, and we don't need more of it."

Where Does Oil Come From? 0:43

Meanwhile, the number of oil rigs drilling in the United States rose for the sixth consecutive week to 381.

The combination of factors led analysts to warn that the world had not yet dealt with the overhang of physical oil, which could drag prices lower again before any sustained recovery.

"The proper signals are not yet being sent to fix the product market," Morgan Stanley said in a note, noting that refined products also needed to draw down a large excess.

"In other words, physical oil markets likely need to get worse before they get better."