NEW YORK – Global oil prices surged around 12 percent on Friday after a report once more suggested OPEC might finally agree to cut production to lessen the planet glut, while a bounce available markets fed appetite for risk.
Despite the strong daily gain, oil prices were poised to end a few days down as much as 5 per cent.
The United Arab Emirates’ energy minister said the business of the Petroleum Exporting Countries was willing to cooperate with an output cut, the Wall Street Journal reported on Thursday after crude futures settled in U.S. trade.
Many traders were skeptical initially about the report, noting that Venezuela and Russia had tried useless earlier in the week to stir Saudi Arabia and other major producers into agreeing to output cuts.
But after a 75 per cent price slump since mid-2014 which has taken crude prices to more than 12-year lows, many were inclined to believe that a rebound was due eventually if production tightens or demand picks up.
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“We expect declining U.S. oil production, in particular, to drive the oil price back up to US$50 per barrel after the entire year,” Frankfurt-based Commerzbank said inside a note.
U.S. crude contracts within the next 5 years were trading under US$50 a barrel on Friday, rising above that much cla only from November 2021 onwards.
U.S. crude’s front-month settled up US$3.23, or 12.3 percent, at US$29.44 per barrel, reaching a session a lot of US$29.66. It hit a 12-year low of US$26.05 the previous day. For that week, it lost 4.7 percent.
Brent’s front-month closed up US$3.30 at US$33.36 a barrel, having slid below US$30 on Thursday. Weekly losses were pared to 2 percent.
Prices extended gains after data showed an eighth straight weekly drop in the number of U.S. rigs drilling for oil. Oil also had a boost from the rally in global equity markets.
Some cited Monday’s Presidents Day holiday in the United States, saying fewer players wanted a short position in oil ahead of the longer saturday and sunday for that New York crude market.
But others, like Tyche Capital Advisors’ Tariq Zahir, were hoping to profit again from bearish bets when the rally peaks. “It gives me great opportunity to put out new shorts in crude spreads,” he said.
Many expected wilder price swings in coming weeks.
“It’s not a one-way price movement anymore,” said ABN AMRO’s senior energy economist Hans van Cleef. “We will discover a period of high volatility.”
? Thomson Reuters 2016
