Oil prices rise on hopes of production cuts

After hitting multi-year lows, oil prices have leapt this week.

Saudi Arabia, OPEC’s top producer, reduced output by 50,000 barrels a day to 10.2 million in January, amid sluggish demand from Chinese refiners.

Al-Saadoun’s comments come the same week as Khalid Al-Falih, chairman of the kingdom’s state oil producer Saudi Arabian Oil Co, said the company is spending as much now as it did before the price collapse and maintaining investments in oil and natural gas projects. “Saying something about the oil price and doing something are very different things, and it seems like panic given the price drop”. The EconoTimes content received through this service is the intellectual property of EconoTimes or its third party suppliers.

During January and February, oil exports from Iran are set to increase more than a fifth from last daily average a year ago.

“We remain highly skeptical that such a meeting will result in credible cuts in supply; thus, we see this as nothing more than an attempt to shift market sentiment, and we do not expect that it will change the physical market imbalance”, Barclays said, referring to meetings between OPEC members and Russian Federation.

Sources say that OPEC officials were holding bilateral talks to persuade Russian Federation to participate in cuts alongside OPEC and for Iran to soften its position.

If realized, a coordinated output cut “would be a step toward establishing a low in the crude oil markets”, said Darin Newsom, senior analyst at DTN.

Prices, however, pared most gains amid growing doubts over the deal to cut production by after media reports said that delegates from the Organisation of the Petroleum Exporting Countries (OPEC) had not yet heard of any plans for talks and that Saudi Arabia had not proposed cuts. He argued it was unfair for Saudi Arabia to cede market share to USA shale oil drillers and other competitors to benefit other countries’ economies. Russian Federation has confirmed it’s ready to participate, according to Interfax.

Finally, Reuters suggested that “it is too early” to determine if OPEC members can reach any agreement to cut production.

“If OPEC proposes to Russia production limits that do not undermine Russia’s long-term objectives, and key Russian producers back the deal, Russia may indeed agree to production limits”, said analysts from USA based ESAI Energy.

Analysts said that one of the main concerns on a possible deal is whether OPEC producers will reduce production and keep patience for markets to rebalance or will only make cuts symbolically.