Oil extends rally on Opec output cut hopes

Oil rose on Monday, extending a rally triggered last week by speculation that OPEC might agree to cut production to reduce a supply glut that has pushed prices to the lowest in over a decade.

On the New York Mercantile Exchange, crude oil for delivery in March surged $3.23, or 12.32%, to end the week at $29.44 a barrel. WTI-Brent spread was stable on Feb-2016.

Kuwait Petroleum International (KPI) on Saturday said oil prices could reach a range of $50 to $60 a barrel by mid-2017.

Kachikwu’s push for an emergency meeting was however opposed by the United Arab Emirates, which like Saudi Arabia had resisted calls for production cuts by the oil cartel in order to retain market share.

The state of Oklahoma, which collects a seven percent tax from every barrel of oil produced in the state, now has a $1.3 billion budget hole due in part largely to the falling price of crude. “We have another series of rumours about OPEC based upon a comment out of the UAE and another attempt to support prices out of Venezuela, which has scaled back its requests and is just asking for OPEC and non-OPEC exporters to agree not to increase production”, he said.

Meanwhile, oil export growth of some Arab countries like UAE and Kuwait has been negative with only five per cent of growth for Saudi Arabia whereas exports of Iranian crude oil to Japanese refineries has experienced a 34-percent growth. The U.S. benchmark slumped to a 13-year low of $26.05 last Thursday, as record crude inventories at the Cushing delivery hub underlined concerns over a supply glut. For the week, it lost 4.7 percent.

The jump in oil prices helped to boost sentiment on stock markets, with the FTSE 100 in London closing 3.1% higher at 5,707 points.

On the week, London-traded Brent futures declined 63 cents, or 2.06%, the second consecutive weekly drop.

China is to release what will be closely watched trade and inflation data and China’s markets are to reopen Monday after the week-long Lunar New Year holiday.

Crude oil prices gained on Monday morning as optimism prevailed that production cuts would come in response to the oversupplied market. “It gives me great opportunity to put out new shorts in crude spreads”, he said.

Some traders still expected wilder price swings in the coming weeks.

“It’s not a one-way price movement anymore”, said ABN AMRO’s senior energy economist Hans van Cleef.