Oil rise 3 percent as China moves to boost economy, crude output drops

Mon Feb 29, 2016 3:55pm EST
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices jumped 3 percent on Monday after China moved to boost its slowing economy, a drop in crude output from OPEC and the U.S., and a pledge by Saudi Arabia to limit market volatility, suggesting a 20-month selloff could be hitting a bottom.

China, the world's largest oil importer, cut its reserve requirement ratio, the amount of cash banks must hold as reserves, for a fifth time in a year.

U.S. government data showed U.S. crude oil output in December fell for a third straight month to the lowest since December 2014, while oil demand rose for the first time since August, government data showed.

Output from the Organization of the Petroleum Exporting Countries fell in February from the highest monthly level in recent history, a Reuters survey found, due to a halt in Iraq's northern exports and outages in other producers.

Saudi Arabia, working with Venezuela and Qatar and non-OPEC producer Russia on a plan to freeze oil output at January highs, pledged to "remain in contact with all main producers in attempt to limit volatility" in crude prices.

"We have to accept the fact that crude (price) is going to work its way higher from here," said Jeffrey Grossman, energy dealer at New York's BRG Brokerage.

Brent crude's front-month contract April LCOJ6 settled up 87 cents, or 2.5 percent, at $35.97 a barrel before expiring and going off the board. May Brent LCOK6 settled up $1.13, or 3.2 percent, at $36.57 a barrel.

U.S. crude's front-month CLc1 settled up 97 cents, or 3 percent, at $33.75.   Continued...

A worker checks the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the West Siberian city of Kogalym, Russia, January 25, 2016. REUTERS/Sergei Karpukhin