Oil jumps after Russia dangles prospect of OPEC cooperation

Wed Jan 27, 2016 3:26pm EST
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By Devika Krishna Kumar

NEW YORK (Reuters) - Oil futures surged on Wednesday after Russia indicated there was a possibility of co-operation with OPEC, fanning hopes for a deal to reduce a global oversupply that sent prices to the lowest levels in over a dozen years last week.

A statement from Russia's energy ministry left the door open to talks with OPEC, moments after the head of Russia's pipeline monopoly said officials have decided they should talk to Saudi Arabia and other OPEC members about output cuts.

The top non-OPEC producer, Russia has in the past been unwilling to cut oil output, as it battles for market share with OPEC output leader Saudi Arabia.

"I remain skeptical, at the end of the day, about that happening as the oil producers are looking at the other guy to cut production while maintaining their own levels," Andrew Lipow of Lipow Oil Associates said.

"I think the geopolitical factors in the Middle East are playing a bigger part in the actual oil production than the statements from energy ministers who'd like to see higher prices."

Hints of a possible deal between OPEC members and rival producers had already helped oil rally 4 percent on Tuesday.

Brent crude rose $1.30, or 4.1 percent, to settle at $33.10 a barrel, after touching a session high of $33.49.

U.S. crude settled up 85 cents at $32.30 per barrel, a 2.7 percent gain, having topped out at $32.84.   Continued...

A natural gas flare on an oil well pad burns as the sun sets outside Watford City, North Dakota January 21, 2016. REUTERS/Andrew Cullen