Oil soars toward $34 on possible production cuts

Russia’s Novak said Thursday in St. Petersburg that Saudi proposals for a cut of as much as 5 per cent at previous Opec meetings related to crude-producing nations in general, not focusing on Russia, Interfax reported.

Brent was up 40 cents to $34.29 a barrel by 1300 GMT (8 a.m. ET) on Friday, after gaining 79 cents, or 2.4 percent, on Thursday.

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

Energy analysts said Thursday the proposed production cut would help shrink some of the global supply glut.

“If they want to cut production they are welcome, we are not going to cut”, al-Naimi said, adding that the Saudis would hold that position “forever, not [just] 2015”.

On Wednesday, WTI Crude was trading at $30.78 per barrel while Brent was at $31.53. At the moment, no talks have been scheduled between Russian Federation and members of the Organization of Petroleum Exporting Countries, according to four delegates who asked not to be identified.

“The oil markets have been in turmoil now for 16 months, with January 2016 trading the most tumultuous we have seen in years”, said Edison analyst Ian McLelland.

He also, according to reports, confirmed that a meeting was proposed between OPEC and non-OPEC oil producing countries, and that Russian Federation was prepared to attend.

Yet crude stocks at the Cushing, Oklahoma, delivery hub fell by 771,000 barrels, which supported the oil prices.

“While we view this outcome as unlikely, a 5 percent production cut by just Saudi Arabia and Russian Federation would be sufficient to bring the market close to balance”, Jefferies said in a research note on Friday, referring to Russia’s comment.

OPEC has historically cut production in low-price environments, but the group has opted not to take action in the past two years.

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

Novak said that a meeting could allow for “consultations about the situation on the market, the low price and possibilities for coordination in terms of production”.

Responding to Novak’s remarks, several OPEC representatives denied plans for a meeting with Russian Federation. “This will more than offset the excess in supply and could even cause a shortage of oil in the world market”.