Oil Soars Towards $34 on Possible Production Cuts

Oil rose on Thursday after a Russian official said that Saudi Arabia had proposed that oil-producing countries cut output by up to 5 percent each, amid a global supply overhang that has depressed prices for over a year and a half.

NEW YORK-Oil prices surged Thursday on comments from Russia’s energy minister that the country is willing to meet with members of the Organization of the Petroleum Exporting Countries to discuss production cuts. One of the delegates said Saudi Arabia has no proposal to trim production by five percent.

Brent had risen 82 cents to $34.71 a barrel by 0808 GMT, after ending up 79 cents, or 2.4 percent, at $33.89 on Thursday, and is heading for its fourth straight session of gains.

Saudi Arabia has repeatedly called on non-members to contribute to output cuts if they want OPEC to help producers deal with the oil glut with the world running out of space to stockpile unwanted crude.

When booming output from the US helped push the global crude market into oversupply in 2014, other large producers responded by increasing their production instead of cutting back.

U.S. crude climbed 21 cents to $33.43 a barrel, having settled up 92 cents, or 2.9 per cent, at $33.22.

The final decision will lie with Putin but Sechin’s input is likely to be crucial as Russian Federation considers acting in tandem with OPEC for the first time since an ill-fated 2001 deal at the start of Putin’s first presidency, when Russian Federation promised modest cuts but raised exports instead.

Crude oil prices gained due to speculation about the news.

Russian Federation produced 11.1 million barrels a day of oil in 2015, and Saudi Arabia pumped 10.1 million barrels a day.

Still, in the absence of a deal, some said the oil market could recover of its own accord, particularly as USA shale producers show signs of capitulation.

“If prices remain at non-profitable levels for an extended period, investments will have to be corrected and this will lead to lower production, but this will not be in the interest of the state”, Russian news agencies quoted deputy prime minister Arkady Dvorkovich as saying.

While the similar headlines on the possible OPEC-Russia cooperation have caused brief rallies in oil prices past year, the recent rhetoric is different in the matter of the involvement of parties from Russia, the analysts said in a report, obtained by Trend.

Global oil production over the next 12 months will fall as much as 1.5 million barrels a day with as much as two-thirds of the reduction coming from the United States, according to FGE Chairman Fereidun Fesharaki.