Oil Jumps after Russia Dangles Prospect of OPEC Cooperation

Venezuelan Oil Minister Eulogio Del Pino will visit Russia, Qatar, Iran and Saudi Arabia on a tour beginning on Saturday of OPEC and non-OPEC countries meant to drum up support for action to stem the tumble in crude prices.

Oil prices extended gains Friday as data showed USA oil drillers are cutting production. Novak stressed it is “too early” to call anything a concrete agreement. Market prices for crude benchmarks dropped to a 12-year low in mid-January, sliding below the historic level of $30 a barrel before starting to recover after January 20.

“With capital expenditure slashed and energy projects killed, a 5 per cent cut would get the market in balance”, said Mr Phil Flynn, a senior market analyst at Price Futures Group.

“Last year, the Saudis kept saying publicly and privately that they had asked the Russians to cut production in the run up to the November meeting”. But oil prices have since retreated a bit, recently sinking below $35 a barrel.

An output cut would be a big reversal by Saudi Arabia, the undisputed leader of OPEC.

“We proceed from the fact that the oil industry is private to a large extent… and is not controled by the state”, he said. Its economy badly needs the oil revenue as it continues to feel the brunt of tough sanctions from the West. The Russian ruble recently collapsed to its lowest level ever. S. crude CLc1 also scaled up 21 cents to $33.43 per barrel with minor shifts through the day.

In the past decades, Saudi-led Opec has acted as a swing producer, slashing its production to lift global prices. Now that this relief rally is occurring, is a possible cooperation among oil-producing nations enough to sustain an actual recovery in oil prices?

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. “If there are short-term adjustments that need to be made and other producers are willing to collaborate, then Saudi Arabia is willing to collaborate”.

United Arab Emirates Energy Minister Suhail bin Mohammed Al-Mazroui said on Wednesday the glut would decrease even if Iran boosted output by 500,000 bpd due to expected growth in global demand of at least 1.3 million bpd.

Oil was steady around $34 per barrel on Friday as hopes of a deal by major exporters to cut production faded slightly.