Oil rebounded from the lowest level in more than 12 years amid the highest price volatility since 2009 as speculation swirls over whether producers will act to bolster the market.
Futures rose as much as 5.9 percent in New York after settling at the lowest since May 2003. The CBOE Crude Oil Volatility Index, which measures expectations of price swings, climbed to the highest level in seven years Thursday. Producers are ready to work together and suppliers won’t make cuts unless there is complete cooperation, United Arab Emirates Oil Minister Suhail Al Mazrouei said on a Sky News Arabia report posted online Feb. 10.
Crude is still poised for a second weekly drop on speculation a global surplus will persist amid record U.S. stockpiles and the potential for increased exports from Iran as sanctions are lifted. Oil rallied above $32 a barrel last week and Venezuela said six OPEC producers and non-member states including Russia would be open to an extraordinary meeting. Prices plunged 19 percent the next six sessions on skepticism a deal could be reached.
“Until you get Russia and Saudi Arabia agreeing to reduce output, I don’t think there is going to be any coordinated supply cuts between OPEC and non-OPEC members,” said Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The fundamental data we continue to see suggests that prices should stay relatively low, even weaken further, considering we haven’t even seen additional Iranian oil hit the market.”
West Texas Intermediate for March delivery rose as much as $1.55 to $27.76 a barrel on the New York Mercantile Exchange and was at $27.52 at 2:34 p.m. Hong Kong time. The contract slid $1.24 to close at $26.21 on Thursday, capping the biggest six- day slide since January 2009. Total volume traded was about 27 percent above the 100-day average. Prices are down 11 percent this week and 26 percent lower this year.
Brent for April settlement added as much as $1.79, or 6 percent, to $31.85 a barrel on the London-based ICE Futures Europe exchange. Prices are down about 7 percent this week. The European benchmark crude traded at a premium of $1.17 to WTI for April.
“‘Prices are not appropriate, I won’t say for the majority only, but for all producers,” U.A.E.’s Al Mazrouei said in an interview in Arabic on Wednesday. “The people who have spent money and have this investment, it’s natural that they won’t make cuts alone unless there is complete cooperation from everybody in that area.”
WTI prices on Thursday afternoon in the U.S. pared earlier losses after a Wall Street Journal reporter tweeted Al Mazrouei’s comments.
Venezuela has lobbied exporters including Russia, Iran and Saudi Arabia to arrange a meeting between members of the Organization of Petroleum Exporting Countries and other suppliers in an attempt to reach an agreement to balance the market. Russia’s largest oil producer Rosneft OJSC said Feb. 10 that it will defend traditional markets and expressed doubts over any coordinated action.
Refiners in the U.S. are slowing processing as profits shrink, exacerbating a crude stockpile glut that is already 130 million barrels above the five-year average. Valero Energy Corp. and PBF Energy Inc. have cut production in Tennessee and Ohio, while PBF’s Toledo plant is losing money producing gasoline, Chief Executive Officer Tom Nimbley said Thursday.
Crude stockpiles at Cushing, Oklahoma, the biggest U.S. oil-storage hub, rose to a record 64.7 million barrels last week, according to government data released Wednesday. The site has a working capacity of 73 million barrels.
BP Plc Chief Executive Officer Robert Dudley this week said the company was “very bearish” on oil during the first half of this year, while trader Vitol Group BV sees a decade of low prices.