World oil prices swung between sharp gains and losses all this week as possible efforts to finally tackle a supply glut were offset by lingering concerns over weak global economic growth.
“This week’s big story (for commodities) has, of course, been the rebound in oil prices on unconfirmed reports that Russia and OPEC may finally be willing to agree coordinated cuts in output,” Capital Economics analyst Caroline Bain said on Friday.
“We are sceptical that anything tangible will come of this, but it is encouraging that oil has held on to its gains even though officials have cast doubt on the speculation.”
On Friday, US benchmark West Texas Intermediate for delivery in March was down 17 cents at $33.05 a barrel.
Brent North Sea for March rose 30 cents to $34.19 a barrel compared with Thursday’s close.
But over the week, Brent rose around 6.0 percent and WTI gained almost 3.0 percent in value.
Commerzbank pointed to continued volatility, with analyst Carsten Fritsch saying that while “prices will rise in the long term”, it is necessary to “warn against short-term price falls”.
He added in a note to clients: “After all, Iran and Iraq will soon be opening up new sources of supply which will pump additional oil onto the market.”
After striking 12-year low points the previous week, crude futures rallied also on hopes of fresh stimulus from the Bank of Japan and the European Central Bank.
Indeed the BoJ delivered Friday by unexpectedly slashing interest rates into negative territory for the first time.
Concerns over the poor state of the global economy linger and oil prices tanked in volatile trading this week also on official US data pointing to weak spots in the world’s biggest economy and consumer of oil.
The US Department of Energy on Wednesday reported that the country’s commercial crude inventories last week jumped 8.4 million barrels to 494.9 million — the highest amount on record.
Prices have crashed by about three quarters since mid-2014 owing to a supply glut and weaker demand growth for crude, as well as a strong dollar that makes commodities priced in the US currency more expensive for holders of weaker units.
– Russian moves –
Crude futures surged Thursday however after Russian reports that Energy Minister Alexander Novak had said Moscow was ready to take part in talks with OPEC to establish possible “coordination”.
The minister alleged that OPEC heavyweight Saudi Arabia had proposed that oil-producing countries, including non-OPEC Russia, cut production by up to five percent, a prospect he said would be discussed at an upcoming meeting.
Novak’s statement led to the highest jump in oil prices in three weeks to at almost $36 a barrel.
Phillip Futures analyst Daniel Ang said the price rally had been owing also to a fall in the dollar after US data showed a steep 5.1-percent fall in new orders for manufactured goods in December.
That was far worse that analysts expected and underlined the weakness in the manufacturing sector of the world’s biggest economy and top oil consumer.
Ang meanwhile stressed that nothing “concrete has been struck yet” regarding possible cuts to output.
A Russian deputy prime minister said Friday that oil companies — and not the state — should decide whether to cut production in the face of low oil prices due in part to a supply glut.
“If prices remain at non-profitable levels for an extended period, investments will have to be corrected and this will lead to lower production, but this will not be in the interest of the state,” Russian news agencies quoted deputy prime minister Arkady Dvorkovich as saying.
Low oil prices have weighed heavily on Russia’s recession-hit economy, which shrank by 3.7 percent in 2015 and is set to continue suffering this year. (AFP)
