Oil prices surge on fresh talk of Opec meeting on glut

USA crude futures surged more than 8% on Wednesday, amid a severely weakening dollar, as energy traders shrugged off a considerable build in US crude futures in favor of growing support for an emergency OPEC meeting aimed at addressing longstanding concerns related to excessive supply.

Recent weakness in the dollar has also supported other commodities priced in the currency, making imports cheaper for several consuming countries, including China.

The US Department of Energy said Wednesday that commercial crude stockpiles in the world’s top oil consumer soared by 7.8 million barrels in the week ending January 29.

Since last week the market has been attuned to talk that Russian Federation and the Organisation of the Petroleum Exporting Countries may meet to discuss cutting production to address the global oversupply that has driven prices to 12-year lows.

The front-month contract for US West Texas Intermediate (WTI) was down $1.18 at $30.44 per barrel after falling to as low as $29.81.

Brent for April delivery was down $1.09 at $33.15 a barrel by 10:57 a.m. EST (1557 GMT), after touching a low of $32.23, down 5.9 percent, in the session.

Oil fell 2 per cent in volatile trading on Thursday, as support from a weakening dollar was overshadowed by scepticism that cash-strapped OPEC member Venezuela’s effort to lobby crude producers for joint output cuts would succeed.

In the a year ago, speculators had racked up the largest short, or bearish, position in crude oil in history and part of the current volatility in the price has come as a result of some of those positions being closed.

Crude oil rebounded by 1.89% to Rs 2,211 per barrel in futures market today as speculators widened their bets, taking positive cues from Asian markets. “The U.S. crude inventory is already at the highest levels since (the) 1930s”, ANZ analysts said in a note on Wednesday.

He also called on the other non-OPEC producers on cutting the oil output and supporting prices.

Saudi Arabia, which maintains huge influence in OPEC, is now running into difficulties after their huge gamble last November opting to flood the market and drive out their rivals. They point out that failure to reach agreement at a meeting that was both highly publicized and anticipated in world markets would only add momentum to the fall in oil prices.

The house added that the probability of a coordinated OPEC supply cut is “extremely low”.