NEW YORK: Oil prices soared on the last day of the week, with the US crude rebounding from a 2003 low, on reports that the Organisation of Petroleum Exporting Countries (OPEC) was willing to organise output cuts that could ease the global oversupply.
US benchmark West Texas Intermediate for March delivery shot up $3.23 (12.3%) 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, closed at $33.36 a barrel in London, up $3.30 (11%) 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 rumours about OPEC based upon a comment out of the 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 6% drop in the US crude oil drilling activity 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.”
Published in The Express Tribune, February 14th, 2016.