Oil prices rallied on Friday, rebounding from a 13-year low the previous day, on speculation of production cuts among some of the world’s biggest suppliers. WTI on Thursday hit its lowest closing mark since May 2003, according to the Oil Price Information Service.
Advertisement
Still, at around 0930 IST the USA benchmark West Texas Intermediate (WTI) for delivery in March was up $1.47, or 5.61%, at $27.68 and Brent crude for April advanced $1.68, or 5.59%, to $31.74 a barrel.
Globally $400bn of spending on new oil and gas projects has been shelved since the price of crude oil collapsed.
Shares in London and the rest of Europe moved higher this morning as the price of oil jumped by 5 per cent following comments from an Opec member about the possibility of production cuts.
“Every time someone comes out and says ‘We’re ready to cooperate, ‘ there’s always a knee-jerk reaction”, to buy, said Peter Donovan, broker for Liquidity Energy in NY.
“The market may get some support from the ongoing talk about an OPEC supply cut”, said Jens Pedersen, senior analyst at Danske Bank A/S in Copenhagen.
He said Friday’s spike was “an indicator that it’s not a one-way price movement anymore…we will see a period of high volatility”.
He said Saudi Arabia will not be content until it is certain it has inflicted enough pain on competitors, particularly USA drillers, whose production gains in recent years contributed significantly to an oversupply that OPEC estimates at 2 million barrels a day. Gold prices surged to a one-year high and US Treasury yields plunged. An output cut would nearly certainly be a game-changer for short term oil prices. US stocks bounced sharply after the report.
There was nothing new in Thursday’s UAE headline, and the reaction in oil markets has been overblown, John Kilduff, founding partner at advisory firm Again Capital, said Friday.
Refiners in the USA are slowing processing as profits shrink, exacerbating a crude stockpile glut that is already 130 million barrels above the five-year average.
Advertisement
“A sanctions-free Iran, Saudi Arabia and Iraq all turned up the taps”, IEA reported.
