Oil rises to $34 on production cut talks

The Monday meeting will be part of Del Pino’s tour of OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC countries organized in an effort to promote a balance of oil prices.

The minister alleged that OPEC heavyweight Saudi Arabia had proposed that oil-producing countries, including non-OPEC Russia, cut production by up to five percent, a prospect he said would be discussed at an upcoming meeting.

“Any deal is hard to reach”, said a non-Iranian Opec source, who added Iran would need to keep output flat or raise it by, say, 100,000 bpd “since higher prices would mean more revenue without the need to raise production”.

Saudi Arabia has yet to comment on the proposal but a senior Persian Gulf OPEC official told Reuters that “Gulf OPEC countries and Saudi Arabia are willing to cooperate for any action to stabilize the global oil market”. When asked if that proposal remains for a proposed meeting with Opec in February, he declined to comment, saying, “that is exactly the subject of discussion”.

Short covering has been a major driver of the recovery in oil prices from the lows they hit last week, after speculators unwound some of the record-high bearish positions they had racked up over the last six months.

For the week, Brent was 7.9 percent higher and USA crude 4.4 percent higher, paring their monthly losses to 6.8 percent and 9.3 percent respectively.

Russia’s largest oil company Rosneft does yet plan to reduce its production. “The kingdom of Saudi Arabia is also conscious that investments must continue”.

Anticipation that OPEC and non-OPEC producers could coordinate production cuts has been around all week, and a closing gain on Thursday would be the third in a row – a first this year.

In a sign that the market sentiment was improving, hedge funds raised their bullish bets on U.S. crude oil for the second straight week, the U.S. Commodity Futures Trading Commission (CFTC) said.

In Russia, the rouble hit an all-time low, street protests have flared in Azerbaijan and investors are concerned about a potential debt default by OPEC member Venezuela. The paper said Iran wants to boost crude exports by 1.5 million barrels per day.

Also, the odds were against Russian Federation since its annexation of Crimea and the conflict in Syria, with the West doing all it could to alienate the country and denying its products market access. If each country cut production by 5%, that would shrink global oil output by more than a million barrels a day, which is roughly equal to the current oversupply in the market, according to analysts.