LONDON – Oil prices bounced Friday, with Brent climbing back above $40, as traders digested falling US output before this month’s key meeting to discuss a proposed production freeze, AFP reports. US production fell for the 10th time in 11 weeks, to 9.0 million barrels per day in the week through April 1, the lowest level since November 2014, according to data from the US Energy Information Administration.
Commercial crude stockpiles in the world’s top oil consumer also dropped, indicating stronger demand. Around 1145 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May added $1.39 to $38.65 a barrel. Brent North Sea crude for June delivery won $1.33 to $40.76 a barrel compared with Thursday’s close.
The market had beat a retreat on Thursday following a five percent rally the previous day in reaction to the decline in US inventories. The US government’s Energy Information Administration (EIA) reported Wednesday that commercial crude inventories slumped 4.9 million barrels in the week ending April 1.
That confounded market expectations for a gain of 2.85 million and followed a 2.3-million-barrel increase the previous week. The figures helped prices build on healthy gains that came on the back of comments from Kuwait that this month’s crucial producers’ meeting could yield an agreement to limit output.
Traders are setting their sights on the April 17 meeting in Doha among crude producers led by Russia and Saudi Arabia to discuss measures to stabilise prices, including an output freeze at January 2016 levels. There have been conflicting signals on whether such an agreement would be reached. Saudi Arabia has said it will only agree to limits if others followed suit, while Iran said it is still ramping up production after Western economic sanctions were lifted only in January.
“Unfortunately, history is against anything (concrete) coming out of the Doha meeting,” analyst David Lennox of Fat Prophets in Sydney told AFP. “But a lot of OPEC countries are feeling great economic pain, which might give them the impetus to take some positive action in cutting production,” he said. James Williams of WTRG Economics said the oil market will probably trade in a rocky fashion ahead of the gathering in Qatar.
“Between now and the Doha meeting, we’re going to see the market up and down a lot depending on which member of OPEC says what,” Williams added. Prices had dived last week after Saudi Deputy Crown Prince Mohammed bin Salman said his country would agree to limit output only if fellow producer Iran did the same.