Hopes of a coordinated cut from OPEC continue to spur WTI prices
Prices for U.S. crude oil benchmark WTI were up over 12% at 1:20 p.m. EST today on continued hopes that OPEC would cut production in order to bolster prices. WTI approached 12-year lows yesterday as the global supply cut persisted, until news that OPEC was ready to consider cuts surfaced, sending oil prices higher before the end of trading.
The UAE’s Oil Minister Suhail bin Mohammed al-Mazrouei said yesterday that OPEC is ready to make cuts, but that they saw production falling from non-member countries in the future, giving them hope that prices would recover anyway.
“The positive thing is the current market is forcing everyone not to increase output,” said al-Mazrouei. “I’m optimistic that the balance will happen this year despite the oversupply and stocks overhang.” Non-OPEC supplies are expected to drop up to 800 MBOPD while global demand growth is seen at 1.3 MMBOPD.
The comments came after Venezuela’s failed attempts to change OPEC’s policy away from defending market share, and back toward its traditional role of maintaining a fair price for crude oil. Any new deal will require the cooperation of OPEC’s Persian Gulf members, in particular Saudi Arabia, in order to be effective.
Despite the impressive jump in crude oil prices today, many remain bearish about WTI and Brent crude in the long-term. Many traders are looking at the jump in prices as an opportunity to short crude if an OPEC deal does not materialize, reports Reuters.
“It gives me a great opportunity to put out new shorts in crude spreads,” said Tariq Zahir, a trader with Tyche Capital Advisors.
“It’s not a one-way price movement anymore” in oil, said ABN AMRO’s senior energy economist Hans van Cleef. “We will see a period of high volatility.”
Rumors of production cuts are far from the real thing, however. Two weeks ago, speculation of cooperation between Russia and Saudi Arabia on production sent crude over $32 per barrel, but neither has shown any actual signs of lowering output.
