Dubai: Amid growing optimism of an Opec deal that could cap output, oil prices may witness a relief rally this week — but analysts say shale oil still remains the number one threat to price increases.

Opec members have been moving closer to a deal, which would likely be the first output cut after a gap of eight years, after Iran signalled in was open to a “flexible approach to production quotas,” meaning Iran would cut production less than other Opec members. Iran had previously resisted production cuts.

“With the new approach that they are using towards Iran, looks like they will be able to come out with a quantum,” Naeem Aslam, chief market analyst with Think Forex told Gulf News. “We expect some sort of a relief rally towards $52 [Dh190.80] per barrel.”

On Friday, Brent crude closed 0.80 per cent higher to be at $46.86 per barrel, bringing the weekly gains to 5 per cent, its first weekly gains in about a month.

However, in the absence of a deal, oil prices would also depend on the performance of the dollar, which was the main cause for the recent slide in prices.

“In the absence of a meaningful decision by Opec, oil prices are expected to remain rangebound, with short term price moves dependent on the level of the US dollar,” Vaqar Zuberi, Head of Research — Hedge Funds/Portfolio Manager — Multi Manager Funds at Mirabaud Asset Management.

United front

Aslam said Opec is trying its best to strike a deal, and show a “united front” keeping in sight the change in the US administration.

A “Trump presidency is certainly a big part of the new equation. The possibility of a higher shale produce is much higher under a Trump administration. So it’s becomes more pertinent for Opec to show a united front, and signal that they are in a better position to control the supply,” Aslam said.

And there has been no let up in supplies of shale. US drillers added 19 oil rigs in the week to November 18, bringing the total count up to 471, the most since January, but still below the 564 rigs seen a year ago, energy services firm Baker Hughes Inc said last week.