By Alison Sider

With OPEC members heading toward a possible showdown this week at their meeting in Vienna, crude prices rallied Monday as traders bet that major oil producers can still reach an agreement to cut production.

U.S. crude futures climbed $1.02, or 2.21%, to $47.08 a barrel on the New York Mercantile Exchange. The global crude benchmark Brent rose $1, or 2.12%, to $48.24 a barrel on London's ICE Futures Exchange.

Members of the Organization of the Petroleum Exporting Countries have been trying for months to strike a deal to reduce output and ease a global glut of crude. In late September, the group announced a tentative plan to implement productioncuts. But they left out important details, guaranteeing volatility for oil in the run-up to the group's Nov. 30 meeting.

Arriving in Vienna, Iraq Oil Minister Jabar al-Luaibi said Monday that he was confident OPEC would reach an agreement this week. Iran and Iraq, which have previously said they want to keep increasing output, indicated in a Monday private meeting that they would consider holding production steady, according to a person familiar with the matter.

That's part of what drove prices higher Monday, said John Kilduff, founding partner of Again Capital.

"Iran and Iraq are holding the key to getting a deal done," he said. "Their rhetoric counts right now."

But there have been few indications that OPEC's members have found a way around the hurdles that have kept them from reaching an accord, even with a strong push by Saudi Arabia. Russia, which isn't a member of OPEC, has stopped short of saying it would curtail output.

Still, many market participants believe the stakes are too high for OPEC members to fail to reach a deal. Oil prices last month climbed above $50 after the cartel pledged to cut production. Some analysts now fear that U.S. crude could plunge below $40 level if oil ministers leave Vienna empty handed.

One challenge for OPEC is to nail down how much each country will be allowed to produce. Another is enforcing any arrangement when the group has a notoriously poor record of compliance and the fact that some sizeable oil producers, like Nigeria and Libya, are exempt from the negotiations.

OPEC's output has also continued to climb over the past two months, with many countries pumping more oil even as they discussed freezing or curtailing production. In September, OPEC agreed to target production levels that would have translated into a 200,000 to 700,000 barrel-a-day reduction.

Tariq Zahir, managing member of Tyche Capital Partners, said the group would now have to agree to cut at least 1 million barrels a day to make a meaningful dent in supply.

"I think there's going to be some kind of a deal done to save face," Mr. Zahir said. "But you need to have a serious cut."

Even if OPEC strikes a deal, its impact on prices may be short-lived.

"We may be seeing prices in the low 40s before we see the high 50s," said Mark Anderle, director of supply and trading at TAC Energy.

Gasoline futures rose 4 cents, or 2.91%, to $1.4127 a gallon. Diesel futures rose 4.28 cents, or 2.91%, to $1.5128 a gallon.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

November 28, 2016 17:19 ET (22:19 GMT)

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