Oil rises as pro­duc­ers an­nounce meet­ing on out­put freeze

The Pak Banker - - MARKETS/SPORTS -

Oil prices firmed on Wed­nes­day on an an­nounce­ment that pro­duc­ers will meet next month in Qatar to dis­cuss a pro­posal to freeze out­put and on grow­ing signs of a de­cline in U.S. crude pro­duc­tion. Pro­duc­ers both from and out­side the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries will hold talks in the cap­i­tal Doha on April 17, Qatari oil min­is­ter Mo­hammed Bin Saleh Al-Sada said.

Around 15 OPEC and non-OPEC pro­duc­ers, ac­count­ing for about 73 per­cent of global oil out­put, sup­port the ini­tia­tive, the min­is­ter said in a state­ment.

Brent (LCOc1) crude fu­tures were up 48 cents at $39.22 a bar­rel at 0948 GMT. U.S. crude fu­tures (CLc1) were trad­ing 60 cents a bar­rel higher at $36.94. Saudi Ara­bia, Qatar and Venezuela along with non-OPEC mem­ber Rus­sia agreed last month to freeze out­put at Jan­uary lev­els, but Iran has re­jected such a deal.

On Mon­day, Rus­sian En­ergy Min­is­ter Alexan­der No­vak said a deal could be signed ex­clud­ing Iran, which he said has the right to boost oil out­put af­ter years of sanc­tions. OPEC sources told Reuters a deal ex­clud­ing Iran is not ideal, but not a deal breaker. An­a­lysts, how­ever, said talks about freez­ing out­put would do lit­tle to rein in a global glut that sees more than 1 mil­lion bar­rels of crude pro­duced ev­ery day in ex­cess of de­mand.

"Any such deal would still not be a game changer. It would re­ally just main­tain the ex­cess sup­ply that is now in place," Thomas Pugh Eco­nom­ics said in a note.

But Stan­dard Char­tered said sup­ply con­cerns due to non-OPEC pro­duc­tion cuts could drive prices above $60 a bar­rel by the end of the year.

"We think that in com­ing months sup­ply-side con­cerns will dom­i­nate, par­tic­u­larly when global in­ven­to­ries start to fall, which we think will hap­pen in the third quar­ter," the bank said in a note.

U.S. shale pro­ducer Linn En­ergy (LINE.O) said on Tues­day that bank­ruptcy may be un­avoid­able as the com­pany missed in­ter­est pay­ments amid a slump in oil prices of as much as 70 per­cent since mid-2014. Other com­pa­nies, also fight­ing for sur­vival, are seek­ing risky and costly bor­row­ing from pri­vate equity firms.

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