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Oil prices shoot up as OPEC shows interest to cut output

Saturday, 13 February 2016 4:31 AM [ Last Update: Saturday, 13 February 2016 4:29 AM ]

Oil prices grow amid speculation over OPEC's willingness to cut output.

Oil prices have made gains on the strength of speculation on OPEC's willingness to consider output cuts in a bid to ease the global supply glut.

On Friday, US benchmark West Texas Intermediate (WTI) for March delivery finished at $29.44 a barrel on the New York Mercantile Exchange, up $3.23.

North Sea Brent crude for April delivery, the European benchmark, shot up $3.30 to $33.36 a barrel in London.

The development came after United Arab Emirates oil minister Suhail Al Mazrouei reportedly said the Organization of the Petroleum Exporting Countries was willing to cooperate with other oil producers on trimming oil output.

However, analysts remain skeptical.

James Williams of WTRG Economics, played down the report, saying, "We have another series of rumors about OPEC based upon a comment out of 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."

Hans van Cleef, the senior energy economist at ABN AMRO, said, “The comments by the UAE oil minister are pushing prices up… but we're still in a long-term downturn. That hasn't changed.”

For ANZ bank analysts, the UAE's comments are as “further jawboning, with the likelihood of a coordinated response on supply cuts very low.”

Oil prices have slumped more than 70% since mid-2014 as producers pump between 1mb/d and 2mb/d of crude in excess of demand.

In its annual Energy Outlook report, Britain’s BP forecast the oil price to spike to $100 a barrel over the coming years as a global oversupply of oil will eventually be eroded.

OPEC decided last December to increase its collective output ceiling to 31.5 mb/d from the previous 30 mb/d.

OPEC approved a Saudi plan to scrap allocating fixed production quotas to member countries in December 2011 and introduced output ceiling of 30 mb/d which does not specify quotas.

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