- Iraq says Saudis, Russians are more flexible on output cuts
- U.S. supply probably rose 4.1 million barrels, survey shows
Oil climbed after Iraq’s oil minister said at a conference in Kuwait that Saudi Arabia and Russia are now more flexible about cooperating to cut output.
Futures rose 3.7 percent in New York. Saudi Arabia and Russia, the world’s biggest oil producers, have become more flexible about collaborating to trim output as crude prices have fallen to unforeseen levels, Iraqi Oil Minister Adel Abdul Mahdi said Tuesday. Russia could work with OPEC to remove supply, OAO Lukoil Vice President Leonid Fedun told state news agency Tass.
Oil is down 15 percent this year as volatility in global markets adds to concern over ample U.S. stockpiles, unfettered Saudi and Russian output and an expected revival in Iranian shipments after the end of sanctions. U.S. crude supplies probably rose by 4 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report.
"There’s some hopeful analysis that OPEC and Russia will come to an agreement to remove supply to boost prices," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "This is also probably a relief rally amid hopes that central banks will add additional stimulus."
West Texas Intermediate oil for March delivery rose $1.11 to close at $31.45 a barrel on the New York Mercantile Exchange. The contract retreated 5.8 percent on Monday after the biggest two-day rally in more than seven years. Total volume traded was 33 percent above the 100-day average at 4:40 p.m.
Futures declined from the close after the American Petroleum Institute was said to report U.S. crude supplies climbed 11.4 million barrels last week. WTI traded at $30.46 at 4:39 p.m.
Brent for March settlement advanced $1.30, or 4.3 percent, to $31.80 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a 35-cent premium to WTI.
Futures advanced amid an equity rally. Stocks rose as investors looked past another rout in Chinese stocks to focus on corporate earnings and the start of the Federal Reserve’s first policy meeting since turmoil gripped financial markets. Commodity companies were seven of the 10 biggest gainers on the Standard & Poor’s 500.
“This flexibility should be finalized, and we should hear some solid suggestions coming from all parties,” Abdul Mahdi told reporters in Kuwait City. He didn’t give details about what the increased Saudi and Russian flexibility entailed.
The Organization of Petroleum Exporting Countries set aside its output target Dec. 4 at a meeting in Vienna. Saudi Arabia, the world’s largest crude exporter, has led the group in fighting for market share against higher-cost producers such as shale drillers in the U.S.
OPEC can’t cut production to balance the market unless other producers cooperate with it, and the group may not need to do so, as its strategy is working, Anas Al-Saleh, Kuwait’s finance minister and acting oil minister, said Tuesday at the conference in that country’s capital.
"There’s some background chatter that OPEC and Russia are exploring a supply cut," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "A deal is still a long shot. I wouldn’t bet on anything unless the Saudis say something."
U.S. crude inventories climbed to 486.5 million barrels in the week through Jan. 15, keeping inventories about 100 million barrels above the five-year seasonal average, according to data from the EIA. They reached 490.9 million in April, the highest since 1930, following 16 straight weekly gains, according to weekly and monthly data from the agency.
"Excess supply and fears of a slowing economy that will curb fuel demand are the prime drivers of the market," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. "If we get a tear of inventory builds like we did last year, we’ll soon head back toward the 12-year lows we touched a week ago."