Oil falls back after jumping on hopes of Russia, OPEC cooperation

“From our point of view, it is unlikely that all the countries within OPEC can agree on production cuts, let alone those countries which are not in the OPEC coalition”, Russia’s RIA news agency quoted Novak at the time, citing an interview with business channel RBC TV.

That appeared to pour cold water on possible joint OPEC and non-OPEC production cuts mentioned by Russian Energy Minister Alexander Novak on Thursday, comments which raised hopes of the first such global output deal in over a decade. Higher crude prices would be welcomed by oil-rich countries where the steep slide has squeezed budgets and caused political turmoil.

The move pushed up price of benchmark North Sea Brent futures by as much as 8 per cent to almost $36 a barrel.

Brent crude advanced more than 5% to around US$35 per barrel, whilst West Texas Intermediary gained 5.5% to just over US$34.

The oil market scored modest gains on Friday (Jan 29), ending a turbulent January that drove prices sharply lower amid worries about the global crude oversupply.

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

“We will go to Russian Federation, a non-OPEC country where we will discuss proposals to stabilize crude”, said del Pino, who is also head of state oil company PDVSA, according to a tweet from the Oil Ministry.

“We proceed from the fact that the oil industry is private to a large extent… and is not controled by the state”, he said.

“Indeed, these parameters were proposed, to cut production by each country by up to 5 percent”, Novak said when asked if Saudi Arabia had made a proposal to cut output.

“Potentially, this will happen with Russia’s cooperation limited to half the percentage reduction that OPEC members need to make for the adjustment”, analysts said.

Still, even if OPEC reduces production, macroeconomic concerns – such as the sluggish economy in China and the deteriorating situation in Brazil – are likely to continue to keep prices at low levels compared to recent yearly averages.

Brent futures have jumped over 25 per cent since their January low and are heading for their fourth straight session of gains.

Edison Investment Research has also reduced its 2016 oil price forecast to $40 a barrel from $60.

Iran plans on increasing its oil output by 500,000 barrels per day and boosting exports, making any agreement among OPEC nations to slash its output incrementally hard to achieve.