Oil jumps on its best one-day percentage gain since January 2009. Oil futures climbed by $3.23, or 12%, to settle at $29.44 a barrel on the New York Mercantile Exchange, according to
Oil prices climbed Friday after the United Arab Emirates energy minister said late Thursday that members of the Organization of the Petroleum Exporting Countries were ready to cooperate on possible production cuts. While stocks jump, Venezuela, meanwhile, proposed that OPEC and non-OPEC producers should at least freeze output at the current level.
The market is taking the comments from the U.A.E. minister “seriously because the U.A.E. is doing an about face,” said Phil Flynn, senior market analyst at Price Futures Group. The U.A.E. was “saying a month ago a cut was going to be over their dead body basically,” said Flynn. “Well, maybe hell froze over.”
As Oil jumps, OPEC has said before that it is willing cooperate on a production cut if other non-OPEC producers such as Russia participate. Given that, some aren’t convinced that an agreement is any closer than it was before.
With slower demand ahead due to refineries going into planned maintenance, oil stocks are expected to continue to increase. Still, there are few signs that the global glut of crude will start to shrink soon.
The minister’s “news is more likely to be poppycock than progress,” because OPEC’s tactics are working, said Matt Smith, director of commodity research at ClipperData.
“The U.S. oil patch is debilitating at a rapid pace” with oil firms maxing out credit lines amid shrinking revenues from lower oil prices, he said. OPEC’s production is also set to jump, with Iran looking to boost its output in the coming months, he added.
Oil prices haven’t likely hit bottom yet, said Tim Evans, chief market strategist at Long Leaf Trading Group. “There is nothing to support the idea that…global growth issues are going to resolve themselves in the near-term. We believe selling any strong rally is prudent.”
“The proposed deal for a cease-fire in Syria might hep bring the Saudis to the table for an OPEC deal,” said Peter Cardillo, chief market economist at First Standard Financial. “I believe one of the reasons oil prices are so low is geopolitical.”
Oil jumps at a time when OPEC was ready to cooperate with a production cut. “We hit a new low and tons of short covering came into the market. that UAE headline was well timed,” said John Kilduff, founding partner of Again Capital. “They arguably held the bottom from a technical perspective on a short term basis.”