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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."

Surging Volume

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."

Burden Sharing

OPEC won’t agree to carry the burden alone in propping up oil prices by cutting supply; non-member nations would have to share the burden, according to the group’s publication. If demand forecasts are correct, "then it is just a case of riding out the storm" and waiting for the market to balance.

"The market is reading way too much into this," Mike Wittner, head of oil-market research at Societe Generale SA in New York, said by phone. "The OPEC Bulletin isn’t an important publication and this isn’t how they would make a key announcement."

OPEC has been boosting supply as it seeks to force higher-cost producers to cut output. The group has exceeded its target of 30 million barrels a day for a year, data compiled by Bloomberg show. Saudi Arabia, OPEC’s top producer, pumped 10.57 million barrels a day in July, the most in monthly Bloomberg data going back to 1989.

Saudi Arabia

"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."

OPEC crude output increased by 108,000 barrels to 32.316 million a day in August, according to a Bloomberg survey of oil companies, producers and analysts.

Russian President Vladimir Putin and Venezuelan counterpart Nicolas Maduro will discuss oil prices and cooperation between Russia and OPEC, Kremlin aide Yuri Ushakov told reporters in Moscow.

The Energy Information Administration trimmed its U.S. production forecast for the first five months of the year as it switches to a new survey, the agency said. The U.S. pumped about 9.44 million barrels of crude a day during the period, down from a previous estimate of an average 9.53 million.

— With assistance by Maher Chmaytelli, and Ilya Arkhipov