Oil market set for more volatility after turbulent week
World oil prices swung between sharp gains and losses 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 today.
"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 per cent and WTI gained almost 3.0 per cent 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.
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 oilproducing countries, including non-OPEC Russia, cut production by up to five per cent, a prospect he said would be discussed at an upcoming meeting.