By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices rose on Friday, rebounding more than 25 percent from 12-year lows hit last week and cutting losses for the month, on prospects of a deal between major exporters to cut production and curb one of the biggest supply gluts in history.
Oil also drew support from firmer stock markets, lifted by weak U.S. gross domestic product growth data that raised hopes the Federal Reserve may slow any planned interest rate hikes. [.N]
The oil market rallied for four straight sessions after a renewed call from the Organization of the Petroleum Exporting Countries for joint efforts with rival producers to cut supply triggered a volley of comments from Russia on a deal with the cartel, something it had been refusing to do for 15 years.
Brent March futures (LCOc1), which expired on Friday, closed at $ 34.74 a barrel, 85 cents or 2.5 percent higher. On Jan. 20, it hit $ 27.10, its lowest since November 2003.
U.S. crude (CLc1) settled up 40 cents or 1.2 percent, at$ 33.62 per barrel, having hit a high of $ 34.40 in the session.
For the week, Brent was 7.9 percent higher and U.S. crude 4.4 percent higher, paring their monthly losses to 6.8 percent and 9.3 percent respectively.
Both contracts briefly turned negative after the Wall Street Journal cited an Iranian oil official as saying the country would not join an immediate OPEC production cut.
Moscow has sent mixed signals, eventually saying veteran minister Sergei Lavrov, who almost never comments on oil policies, would visit the UAE and Oman to discuss oil markets.
Cash-strapped Venezuela is also sending its oil minister to Russia on a tour beginning on Saturday of non-OPEC and fellow OPEC states.
“The market has rewarded these statements about the possibility of a deal, even though I think it’s ridiculous,” said John Kilduff, partner at Again Capital LLC in New York.
He noted that Iran and Iraq were determined to boost production, and were unlikely to come together with Saudi Arabia to cut OPEC output. The Saudis have made no official statement on a deal.
“This is a rally on false hopes, unfortunately”
Other analysts said prices may have found a bottom and could rally as high as $ 45 by year-end as non-OPEC supply is reduced and global demand improves.
U.S. oil production fell in November for the second straight month and U.S. shale producers, who have helped add to the glut, have slashed 2016 capital spending plans more than expected.
Meanwhile, the U.S. oil drilling rig count fell for the sixth straight week with more cuts seen, oil services company Baker Hughes Inc (BHI.N) said.
“With more energy companies announcing cuts and OPEC contemplating a cut, it looks like oil is forming a bottom,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
“Now the question becomes how high can they go. The charts look like a test near $ 40 is on the cards.”
In a sign that the market sentiment was improving, hedge funds raised their bullish bets on U.S. crude oil for the second straight week, the U.S. Commodity Futures Trading Commission (CFTC) said. [CFTC/]
“It’s something that sub-$ 30 oil does. It makes some traders inclined to think that we are have reached or are near a bottom, so they want to be positioned ahead of it,” said Gene McGillian, Senior Analyst at Tradition Energy in Stamford Connecticut.
(Additional reporting Simon Falush and Dmitry Zhdannikov in London, Meeyoung Cho in Seoul and Henning Gloystein in Singapore; Editing by Marguerita Choy and David Gregorio)
