Oil reverses drop on report Iran may support OPEC output action

TEHRAN, Iran (Bloomberg) -- Oil rose, reversing an earlier decline, on speculation Iran may be more willing to cooperate with other producers seeking to freeze output.

Prices gained as much as 1.9% after Reuters reported that Iran is sending "positive signals" that it may support joint action to bolster the oil market, citing unidentified sources in OPEC and the oil industry. Iran hasn’t decided whether to join any action, according to the sources.

Oil entered a bull market Aug. 18, having climbed more than 20% since dipping below $40/bbl earlier in the month. Crude was driven higher partly by speculation that discussions among members of the Organization of Petroleum Exporting Countries may lead to action to stabilize the market. Prices subsequently retreated as Iraq sought to increase exports and Nigerian militants called an end to hostilities, potentially boosting supply.

"This obviously gives cause for optimism but it’s far from concrete action," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "People are buying on the rumor. We’ll have to see if they sell on the news."

West Texas Intermediate for October delivery rose 43 cents, or 0.9%, to $47.84/bbl at 11:09 a.m. on the New York Mercantile Exchange, after dropping 1.7% earlier. Brent for October settlement climbed 53 cents, or 1.1%, to $49.69/bbl on the London-based ICE Futures Europe exchange.

U.S. crude inventories probably dropped by 1 MMbbl last week, according to the median estimate in a Bloomberg survey before the Energy Information Administration report on Wednesday. Gasoline supplies probably shrank by 1.5 MMbbl. Crude and motor-fuel inventories are still at their highest seasonal level in at least two decades.