Oil climbed the most in almost two months as U.S. crude output continued to slide before a meeting between suppliers to discuss freezing production.
Futures rose as much as 6.9 percent in New York. U.S. output slid for the 10th time in 11 weeks through April 1 and crude stockpiles fell, according to data from the Energy Information Administration on Wednesday. Major producers from Saudi Arabia to Russia will meet in Doha on April 17 to discuss freezing output in a bid to stabilize prices.
“There’s a lot of nervousness about the April 17 meeting and what it will mean for the market,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “We’re still hemmed in a range below $40. Breaking through would be very bullish for the market.”
Crude slid to the lowest level in almost 13 years in February before rebounding on signs a global glut will ease. Prices have whipsawed this week amid speculation over whether an accord to cap output can be reached. Saudi Arabia said it will only agree to a freeze if it’s joined by other suppliers including Iran, while Kuwait said a deal can be done without Tehran’s support.
West Texas Intermediate for May delivery advanced $2.51, or 6.8 percent, to $39.78 a barrel at 11:19 a.m. on the New York Mercantile Exchange. Futures are heading for the biggest gain since Feb. 12 and are up 8.1 percent this week. Total volume traded was 38 percent above the 100-day average.
Brent for June settlement rose $3.35, or 6 percent, to $41.78 a barrel on the London-based ICE Futures Europe exchange. The front-month contract’s discount to the second-month was at 2 cents. The global benchmark crude traded at an 97-cent premium to WTI for June.
“Prices just flop back and forth,” said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston. “The market is extremely psychotic, subject to sharp reversals on inconsequential information.”
Russia is seeking a successful result from the Doha meeting, Energy Minister Alexander Novak told reporters in Moscow Friday, adding that countries are discussing a freeze of oil production at January levels. Russian oil and condensate production will rise through 2017, even as the nation prepares for the talks, according to Goldman Sachs Group Inc.
“I’m not buying this rally,” said Stewart Glickman, an equity analyst at S&P Capital IQ in New York. “We went from $26 to $41 on optimism that something will happen to curb supply. The risks of a sharp downturn remain greater than those for a rally.”
Recent moves signal Iran is seeking to win market share, not curb output. State-run National Iranian Oil Co. will sell the Forozan Blend oil for May to Asia below the level offered by rival Saudi Aramco for Arab Medium, the third month the grade is being offered at a discount after being at a premium for almost seven years through February, data compiled by Bloomberg show.
“The news doesn’t justify this move,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We should be moving lower on the Iranian comments. Hope about the U.S. economy and the drop in shale production must be giving the market support.”
U.S. crude production slid by 14,000 barrels a day to 9.01 million a day, according to EIA data. Refinery utilization rates rose ahead of the summer driving season by 1 percentage point for a second weekly gain, to 91.4 percent of total capacity.
Baker Hughes Inc. will publish its latest U.S. oil rig count later Friday. That number has dropped steadily, reaching 362 as of last week from 1,609 rigs in October 2014.
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