Crude oil prices bounced back sharply on Thursday from earlier falls on a media report suggesting Russia is warming to the idea of reducing its output.
Brent, the international benchmark, climbed 2 per cent in the course of 50 minutes after the headlines broke, leaving it up 1 per cent above Wednesday’s settlement price at $59.35 a barrel.
US marker West Texas Intermediate, which earlier fell below $50 for the first time since October 2017, also recovered, leaving it up 1.4 per cent on the day at $50.99.
The gains came after a Reuters report that the country is opening up to the prospect of cuts in oil production amid a sharp fall in crude prices since early October. It said Russia’s energy minister had held a meeting with local oil groups in which the subject was discussed.
Russia and Opec are still at the stage of evaluating the situation in the oil markets and developing optimal decisions on future work, Russia’s energy minister Alexander Novak said later in the day, declining to say whether Russia supports cutting production in 2019, Interfax agency reported.
“I cannot say what our position is yet, as we are still at the stage of developing and evaluating the situation. It especially concerns the first and second quarters, the supply and demand forecasts,” he said.
“As you know the ministerial meeting will take place in the first day of December. I am sure that together with our colleagues from Opec and non-Opec countries we will find a co-ordinated and consolidated decision that will benefit the oil market,” he said.
Saudi Arabia’s energy minister said on Wednesday the Opec cartel, along with non-member partners like Russia, were “longing” to bring stability back into the market. But he cautioned the kingdom “will not do it alone”.
Oil prices have sustained a severe blow amid growing concerns over high supplies and worries a slowdown in global growth will dent demand.
An Opec meeting on December 6 “has assumed critical importance for prices, with preliminary discussions between Saudi Arabia, Russia, and the US likely at the G20 meeting on November 30,” said Gordon Gray, strategist at HSBC.
Increases in drilling by US shale companies has added to the sense of angst. “The recovery in crude prices from their 2016 lows has seen a resurgence of activity in US tight oil,” said Mr Gray.
The spectre of growing shale supply was reinforced on Wednesday, when data from the US energy department showed American crude inventories climbed by 3.6m barrels last week. At just above 450.5m barrels, US crude stocks are 7 per cent above the five year average for this time of year, according to official data.
WTI has dropped by more than a third from its October peak of $76.90, while Brent has declined by a similar margin.
The drops have ricocheted into other markets, with both the shares and debt of energy companies and others in the industry taking a hit.