On Tuesday, oil prices climbed to $32 per barrel as traders mulled talk of an OPEC-Russia coordinated output cut to curb oversupply.
Oil prices have been under immense pressure since the beginning of the year on the back of expected oversupply from Iran. Iran recently compiled to agreements in the nuclear deal, prompting the US to lift sanctions. Oil prices have been tumbling since, on the likelihood that Iran’s oil will soon flood the markets. Hints of further stimulus measures from the European Central Bank, and a fall in demand for oil from the global economy, including China, the world’s largest exporter has kept oil prices down.
In rollercoaster trade last week, oil briefly plunged to 12-year lows under $27 but bounced higher on Friday on hopes that possible stimulus measures in the Eurozone and Japan would perk up demand. However, the rally almost fizzled out on Tuesday as stubborn oversupply fears resurfaced.
At about 1800 GMT, Brent North Sea crude for delivery in March jumped by $1.84 to $32.34 per barrel from $30.5 a barrel on Monday. The US benchmark West Texas Intermediate (WTI) for March added $1.69 to $32.03 a barrel compared with Monday’s close at $30.34.
The market also rebounded as traders took the opportunity to snap up cheap crude, having hit 12-year lows last week on chronic oversupply.
“Vague talk of a possible joint production cut with Russia and OPEC is doing the rounds again,” noted CMC Markets analyst Jasper Lawler. “Any joint action seems unlikely since US shale producers would just use the resulting higher prices as an opportunity to ramp up their own (output) again.”
The Kuwaiti and Iraqi oil ministers declared on Tuesday that OPEC will not cut production unless producers outside the cartel do the same, despite plunging crude prices that have ravaged its revenues.
“OPEC cannot cut its production unless there is a similar reduction by producers outside OPEC,” Kuwait’s acting oil minister, Anas al-Saleh, told reporters on the sidelines of an oil conference.
“I don’t see any logic in OPEC cutting production while non-OPEC (countries) don’t cut,” Saleh said.
Iraqi Oil Minister Adel Abdulmahdi said his country was “ready to cooperate” on cutting production to raise oil prices but only if non-OPEC producers did as well.
The 12-nation Organisation of Petroleum Exporting Countries (OPEC) has refused to cut production despite the recent collapse in oil prices.
Led by Gulf producers, the cartel is refusing to reduce crude output as it seeks to drive less-competitive players, including US shale producers, out of the market.
“The expectations around central banks unleashing stimulus measures … provided false hopes for bullish investors, who have fallen victim to the sharp declines led by the intensifying concerns around the excessive oversupply of oil,” said research analyst Lukman Otunuga at traders FXTM.