Oil prices surged 8 percent on Monday

Oil prices soared on Monday by more than 8 percent after the US government reduced crude output estimates and OPEC said that it is ready to talk with other producers to achieve “fair prices”.

Brent October futures climbed 8.2 percent, or $4.10, to $54.15 a barrel, while US crude rose 8.8 percent, or $3.98, to $49.20 a barrel.

In just three days U.S. crude oil prices have surged by more than $10 a barrel – the biggest three-day gain in 25 years.

Why have oil prices surged?

Citi said in a report: “Sharp gains over the past three trading sessions were driven by a combination of short covering and chart-readers again looking to call a bottom falsely,”

A commentary in the latest OPEC Bulletin publication suggests that the group may approach other producers about cutting output.

According to the report: “As the organization has stressed on numerous occasions, it stands ready to talk to all other producers. But this has to be on a level playing field. OPEC will protect its own interests,”

However, Mike Wittner, head of oil-market research at Societe Generale SA in New York, told Bloomberg News: “The market is reading way too much into this,” adding that “the OPEC Bulletin isn’t an important publication and this isn’t how they would make a key announcement.”

“The non-Gulf members screamed in the fourth quarter of 2014 because of falling prices, were quiet in the second quarter because they rose, and are now at it again,” Wittner said.

“Until Saudi Arabia says something this is all meaningless. Why would the Saudis change their logic and waste all they have already done.”

In addition, the latest US government figures revealed that domestic oil production in the first half of 2015 was actually lower than original estimates.

According to the Energy Information Administration, survey-based data revealed that the US only pumped 9.3 million barrels per day (bpd) in June, about 100,000 bpd lower than in May and almost 250,000 bpd below a previous estimate.

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