Oil at 2016 high, U.S. crude above $40 on output freeze hopes

Thu Mar 17, 2016 3:28pm EDT
 
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices hit 2016 highs on Thursday, with U.S. crude surging 5 percent to pierce the $40 barrier, on optimism that major producers will strike an output freeze deal next month amid rising crude exports and gasoline demand in the United States.

A weaker dollar .DXY after a Federal Reserve policy decision on Wednesday that indicated two U.S. rate hikes this year instead of four also drew oil buyers using currencies such as the euro EUR=. [FRX]

OPEC kingpin Saudi Arabia and non-OPEC producers led by Russia will meet on April 17 in the Qatar capital Doha, aiming for the first global supply deal in 15 years.

"The remote possibility that a coordinated supply control effort comes from this meeting, assuming it even happens, has put market bears on the defensive," said Pete Donovan, broker with Liquidity Energy in New York.

Oil prices have surged more than 50 percent from 12-year lows since the Organization of the Petroleum Exporting Countries floated the idea of a production freeze, boosting Brent up from around $27 a barrel and U.S. crude from around $26.

On Thursday, the front-month in U.S. crude's West Texas Intermediate (WTI) futures CLc1 settled up $1.74, or 4.5 percent, at $40.20, after scaling a 2016 high of $40.26.

Brent crude's front-month LCOc1 finished up $1.21 at $41.54, after earlier reaching the year's peak of $41.60.

"For now, the market is staying well supported," said Olivier Jakob, oil analyst at Petromatrix. "It will be difficult to return to the lows of the year."   Continued...

 
Pump jacks are seen at the Lukoil company owned Imilorskoye oil field, as the sun sets, outside the West Siberian city of Kogalym, Russia, January 25, 2016.  Picture taken January 25, 2016. REUTERS/Sergei Karpukhin