prices claw higher, but weekly loss looms on supply
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[February 12, 2016]
By Libby George
LONDON (Reuters) - Oil prices jumped on
Friday on prospects of a coordinated production cut sparked by comments
from the energy minister of OPEC member United Arab Emirates.
Still, analysts said such a move remained unlikely and prices for
Brent and U.S. West Texas Intermediate (WTI) crude were on track for
weekly losses of more than 7 percent and 11 percent, respectively,
weighed down by oversupply.
Brent <LCOc1> gained as much as 6 percent against the previous day's
settle and was up 4.42 percent at $31.39 per barrel at 7.16 a.m. ET.
"The comments by the UAE oil minister are pushing prices up...but
we're still in a long-term downturn. That hasn't changed," said Hans
van Cleef, senior energy economist at ABN AMRO.
He said Friday's spike was "an indicator that it's not a one-way
price movement anymore ...we will see a period of high volatility".
UAE Energy Minister Suhail bin Mohammed al-Mazrouei said the
Organization of the Petroleum Exporting Countries was willing to
cooperate on an output cut, but added that cheap oil was forcing
supply reductions that would help rebalance the market.
WTI futures <CLc1> gained as much as 6 percent and were up 4.46
percent at $27.38 per barrel at 7.16 a.m. ET after hitting lows not
seen since 2003 in the previous session.
Traders said the jump in WTI could have been a result of U.S.
producers unwinding hedges they had locked in at higher prices in
order to generate cash to service debt and costs.
Despite the UAE comments, analysts said they saw little chance of a
common policy from OPEC producers.
Ayham Kamel, Middle East and North Africa director at Eurasia Group,
said it was unlikely there would be a serious discussion of any deal
between Iran and Saudi Arabia until there was clarity on Iran's
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"Even then, the fact that U.S. shale production is responsive to
prices on a much shorter timeframe than other oil production also
means that there is less of an incentive to work to transcend the
geopolitical tensions and come to an agreement within OPEC, or even
one including Russia," Kamel said.
Oil prices have tumbled over 70 percent since mid-2014 as producers
pump 1-2 million barrels of crude every day in excess of demand as
economic growth stalls, led by China's slowdown.
"Oil is highly volatile," Bjarne Schieldrop, chief commodities
analyst at SEB in Oslo, said, adding "it's very clear that we're
still running in a surplus situation and stocks are building".
(Additional reporting by Henning Gloystein in Singapore; editing by
Jason Neely and Susan Thomas)
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