THE prospect of OPEC and its rival producers, especially Russia in cooperating to tackle oil supply glut has helped to raise the prices of crude to $31 per barrel last week.
Iran’s oil minister said Tehran was ready to negotiate with Saudi Arabia and the Kremlin’s oil tsar Igor Sechin proposed producing countries reduce output by 1 million barrels per day without saying whether non-OPEC member Russia would cut.
While traders and delegates from the Organization of the Petroleum Exporting Countries are skeptical any deal between the group and rival producers which would be the first in over a decade will happen, the prospect is supportive for the market.
“If prices drop further, the chance for joint action increases and this in turn should prevent a further sharp drop in prices,” said Carsten Fritsch of Commerzbank. “Today’s gain is just a bounceback after yesterday’s sharp sell-off.”
Brent crude LCOc1 was up 55 cents at $30.87 a barrel by 1017 GMT. The contract fell for a fourth straight session on Tuesday to end down 7.8 percent. U.S. crude CLc1 was 55 cents higher at $28.49.
Oil collapsed from above $100 in June 2014 to a 12-year low of $27.10 last month, pressured by oversupply and a 2014 change of policy by OPEC to focus on market share, not support prices.
The drop has squeezed producers’ oil income and is having a wider impact. Turmoil in financial markets, in which shares of the world’s biggest banks fell steeply this week, is partially caused by the low oil price, the head of BP said on Wednesday.
“Of course the turmoil is a big concern,” BP Chief Executive Bob Dudley told Reuters. “I’ve been traveling recently to major consuming countries like Japan and even they say they would like higher oil prices.”