Oil rises af­ter Rus­sia says open to OPEC meet­ing

The Pak Banker - - MARKETS/SPORTS -

Oil rose on Wed­nes­day, par­ing ear­lier losses af­ter fresh com­ments from Rus­sia about its open­ness to talk with OPEC over out­put cuts helped re­vive hope among in­vestors that the world's largest pro­duc­ers could act to boost prices.

Rus­sian For­eign Min­is­ter Sergei Lavrov said if there is con­sen­sus among the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries and non-OPEC mem­bers to meet, "then we will meet".

This helped push the price of oil, which had been set for a third day of de­clines af­ter data on Tues­day showed an­other big build in U.S. in­ven­to­ries, off the day's lows. Brent for April de­liv­ery LCOc1 rose 40 cents to $33.12 a bar­rel by 4.30 a.m. ET, pulling away from a ses­sion low of $32.30. U.S. crude fu­tures rose 46 cents to $30.34, off a ses­sion low of $29.40.

"Is there go­ing to be a meet­ing be­tween Rus­sia and OPEC? That is a sup­port­ive fac­tor in this rally that we've seen in the last one hour," PVM Oil As­so­ciates an­a­lyst Ta­mas Varga said.

"(Oil-pro­duc­ing) coun­tries are at the brink of de­fault ... so the sit­u­a­tion is dire."

Cash-strapped Nige­ria and An­gola are dis­cussing po­ten­tial fi­nanc­ing from the World Bank, which, to­gether with the In­ter­na­tional Mon­e­tary Fund, is in talks with Azer­bai­jan.

The 70 per­cent drop in the crude price over the last 18 months has hit the bud­gets of oil-de­pen­dent na­tions such as Nige­ria, Venezuela, Rus­sia and even some of the richer Gulf na­tions such as Bahrain.

De­mand for oil, par­tic­u­larly in Asia, proved ro­bust last year, but not enough to ab­sorb near-record sup­ply and bal­loon­ing in­ven­to­ries of un­wanted crude. U.S. crude stocks rose by 3.8 mil­lion bar­rels to 500.4 mil­lion in the week to Jan. 29, data from the Amer­i­can Pe­tro­leum In­sti­tute showed.

"The (global) in­ven­tory sit­u­a­tion is go­ing to get worse in the se­cond quar­ter as we hit the peak refining rate at the end of this quar­ter," Tony Nu­nan, oil risk man­ager at Mit­subishi Corp in Tokyo, said. A re­bal­anc­ing be­tween oil de­mand and sup­ply will not come un­til mid-2017, Mor­gan Stan­ley said in a note. "De­spite the myr­iad an­nounce­ments of capex cuts, pro­duc­tion has yet to re­spond enough to re­bal­ance the mar­ket," Mor­gan Stan­ley said.

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