Oil up 3 percent on possible production cuts to remedy glut

Thu Jan 28, 2016 1:40pm EST
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By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices were about 3 percent higher on Thursday after the Russian energy minister said Saudi Arabia had proposed that oil-producing countries trim output, which would be the first global deal in over a decade to help clear a glut that has depressed prices for over a year and a half.

Prices pared gains amid growing doubts over the deal to cut production by up to 5 percent after media reports said that delegates from the Organization of the Petroleum Exporting Countries had not yet heard of any plans for talks and that Saudi Arabia had not proposed cuts.

Crude had jumped as much as 8 percent after Russian Energy Minister Alexander Novak revealed the proposed reductions in output, which would amount to about 500,000 barrels a day of cuts by Russia, one of the largest producers outside OPEC.

But by 1:30 p.m. EST (1830 GMT), Brent LCOc1 was up 73 cents, or 2.2 percent, at $33.83 a barrel, after trading as high as $35.84.

U.S. crude CLc1 was up 98 cents, or 3 percent, at $33.28 per barrel, down from a high of $34.82.

The Russian minister also said that it was reasonable to discuss the situation in the oil market and that OPEC was trying to organize a meeting with other producers next month.

A senior Gulf OPEC delegate said that Gulf countries and Saudi Arabia are willing to cooperate on any action to stabilize the oil market.

Anticipation that OPEC and non-OPEC producers could coordinate production cuts has been around all week, and a closing gain on Thursday would be the third in a row - a first this year.   Continued...

A woman pumps gas at a station in Falls Church, Virginia December 16, 2014. 
REUTERS/Kevin Lamarque