NEW YORK, Feb 13, (AFP): Oil prices soared Friday, with US crude rebounding from a 2003 low, on reports that OPEC was willing to organize output cuts that could ease the global oversupply.
US benchmark West Texas Intermediate for March delivery shot up $3.23 (12.3 percent) to $29.44 a barrel on the New York Mercantile Exchange.
The contract had lost more than $4 in the prior four sessions, sinking to the lowest level since May 2003.
Brent crude for April delivery, the European benchmark, finished at $33.36 a barrel in London, up $3.30 (11 percent) from Thursday’s settlement.
A big catalyst was a Wall Street Journal report that United Arab Emirates oil minister Suhail Al Mazrouei had said the OPEC cartel was willing to cooperate with other producers on trimming crude output.
The report was apparently based on a reporter’s tweet of the minister’s interview with Sky News Arabia. But it was enough to spark a huge turnaround in the market.
James Williams of WTRG Economics discounted the report.
“We have another series of rumors about OPEC based upon a comment out of UAE and another attempt to support prices out of Venezuela, which has scaled back its requests and is just asking for OPEC and non-OPEC exporters to agree not to increase production,” he said.
Bart Melek of TD Securities said a six percent drop in US crude oil drilling activity reported by Baker Hughes had also reinforced sentiment.
The US rig count fell by 28 to 439 last week, as low as it was in 2010, Melek said.
“So ultimately we should expect lower production… and with lower production in the US, it’s more likely Saudi Arabia and other OPEC members might want to decrease output.”
Thursday’s sharp falls “triggered some kind of bargain-hunting”, said Bernard Aw, a market strategist at trading firm IG.
He added it was unlikely that price support had come from another report suggesting the OPEC producers’ cartel was open to working towards cutting output. The point was echoed by Michael McCarthy, chief market strategist at CMC Markets in Australia.
“Until we hear an indication from a country or from a large producer that they are prepared to cut their own production, I would severely discount these comments,” he told AFP.
Low oil prices have hammered OPEC’s poorer producers such as Venezuela and Nigeria, but its influential Gulf members led by Saudi Arabia have refused to cut output as it looks to maintain market share in the face of competition from US shale.
OPEC has meanwhile called on non-cartel producers such as Russia to participate in any coordinated reductions to output.