Oil rises toward $34 on chance of production cut

LONDON:  Oil rose toward $34 per barrel on Thursday, hitting a three-week high and bouncing well off a 12-year low set this month, supported by the possibility that major producers may cooperate to cut production.

Russian officials have decided they should talk to Saudi Arabia and other OPEC countries about output curbs to bolster oil prices, the head of Russia’s pipeline monopoly said.

Members of the Organization of the Petroleum Exporting Countries such as Nigeria and Venezuela have called for cuts to bolster the oil price, which has halved since last May.

Until this week, however, there were few signs that the biggest producers were ready to make such a move.

“The fact that the bigger oil producers are talking in these terms is limiting the downside,” Michael Hewson, chief market analyst at CMC Markets, said.

Brent crude was up 62 cents at $33.72 a barrel by 1022 GMT (5:22 a.m. ET), after gaining 4.1 percent in the previous session.

It was at its highest since January 8 and was more than $6 higher than the 12-year low set this month, although still down around 9 percent this month.

U.S. crude was up 41 cents to $32.71 a barrel. It settled the previous session up 85 cents, a 2.7 percent gain.

Saudi Arabia’s deputy minister for company affairs at the Ministry of Petroleum and Mineral Resources said on Thursday in Tokyo that OPEC estimates global oversupply to be around 2 million barrels per day (bpd).

“It will take some time for the market to rebalance,” said Aabed A. Al-Saadoun. “We feel that the market will begin to come into balance in 2016 and that demand for energy in all forms will continue to increase.”

The Energy Information Administration said on Wednesday that U.S. crude inventories climbed by 8.4 million barrels last week, higher than analyst expectations for a rise of 3.3 million barrels.

That brought crude inventories to the highest level since the EIA began tracking the data.

However, investors overlooked this seemingly bearish data and focused on crude stocks at the Cushing, Oklahoma delivery hub, which fell by 771,000 barrels. [EIA/S]

“Cushing was a crisis zone because it was getting close to capacity, so there is some relief for the inventory overhang,” said Dominic Haywood, analyst at Energy Aspects

REUTERS

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