Oil climbed to a three-week high after Russia’s Energy Minister was reported to say that OPEC and other producers will meet next month to discuss a potential production cut.
Futures surged as much as 7.8 percent in New York. Alexander Novak said the meeting participants may discuss a potential production cut, Interfax reported. He declined to comment on whether an earlier Saudi Arabian proposal for all oil-producing countries to trim production by 5 percent was still on the table, according to Interfax. The Organization of Petroleum Exporting Countries abandoned its output target on Dec. 4 at a meeting in Vienna, and Saudi Arabia has led the group in fighting for market share against higher-cost producers such as shale drillers in the US.
“It looks more and more like this is the first sign of surrender in the global production war,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “With capital expenditure slashed and energy projects killed a 5 percent cut would get the market in balance.”
Oil is down about 6 percent this year as volatility in global markets adds to concern over brimming U.S. stockpiles and an expected increase in Iranian exports after the removal of international sanctions. Saudi Arabia, the de facto leader of OPEC, has insisted that output cuts can only happen with the cooperation of other producers.
West Texas Intermediate for March delivery rose $1.89, or 5.9 percent, to $34.19 a barrel at 9:32 a.m. on the New York Mercantile Exchange. The contract touched $34.82, the highest intraday level since Jan. 6.
Brent for March settlement, which expires Friday, gained $1.80, or 5.4 percent, to $34.90 a barrel on the London-based ICE Futures Europe exchange. The more-active April contract increased $1.95 to $35.88.
On Wednesday, Russia talked down the prospect of working with OPEC to cut output as the country’s energy minister met with heads of the nation’s biggest oil companies to discuss coordinating with the group. President Vladimir Putin’s spokesman Dmitry Peskov told reporters that while consultations with other producing countries were regular, there wasn’t any “specific discussion on coordination of actions” on output.
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