Oil Prices Surge as OPEC Nations Plan to Cut Production

Oil prices soared as much as 12% on February 12 after new suggestions that OPEC nations were set to cut oil production.

According to the Wall Street Journal, the United Arab Emirates’ energy minister said that OPEC members were ready to reduce output.

Meanwhile, Venezuela’s oil minister said oil-producing nations were on a “very good path” to clinch a deal.

However, traders said sharp falls on February 11 may have triggered some bargain-hunting.

Eulogio Del Pino, the Venezuelan minister, who recently visited Russia and Saudi Arabia as part of a global tour to drum up support among both OPEC and non-OPEC producers, said “we’re on a very, very, very good path” to reducing production.

Brent crude closed up $3.30 at $33.36 a barrel in New York after falling below $30 on February 11.

After sinking to a 12-year low of $26.05 on February 11, US crude settled up 12%, or $3.23, to $29.44 a barrel – its biggest one-day rise since 2009.

Many traders were skeptical about the Journal‘s report, pointing out that Venezuela and Russia had tried in vain earlier this week to stir Saudi Arabia and other major producers into agreeing to output cuts.

However, some believe that prices would rebound sooner or later if production tightened or demand rose.

Commerzbank analysts said: “We expect declining US oil production, in particular, to drive the oil price back up to $50 per barrel by the end of the year.”

Friday’s price rises were also aided by figures from oil services company Baker Hughes, which said that US energy companies cut the number of oil rigs for the eighth consecutive week to the lowest levels since January 2010.

Drillers removed 28 oil rigs, bringing the total rig count down to 439, Baker Hughes said.

The jump in oil prices helped to boost sentiment on stock markets.

Wall Street was trading higher on February 12, with the S&P 500 rising 1.8% and the Dow Jones Industrial Average up close to 2% in late trading.