10:54 am
21 October 2016

Nigeria and Saudi Arabia Agree to Cooperate, Oil Prices Rise By Almost Six Percent As Producers

Oil prices jumped by almost six per cent on Thursday thus erasing losses of the past two days, after major producers firmed up plans to meet in Qatar to discuss an output freeze.

United States crude settled up $2.12, or 5.8 per cent, at $38.46 a barrel, after falling by five per cent in the past two sessions.

Brent crude finished up $1.59, at $40.33 a barrel, after falling below $40 in previous sessions.

Crude prices got a heady start after Qatari Oil Minister Mohammed Bin Saleh Al-Sada said producers from within and outside the Organisation of the Petroleum Exporting Countries (OPEC) will meet in Doha on April 17 to discuss output freeze plans.

Around 15 OPEC and non-OPEC producers, accounting for about 73 percent of global oil output, support the initiative, the minister had said.

Since the freeze was first proposed last month, prices have recovered about 50 per cent from decade-low levels but been volatile without a firm meeting date.

Oil gained further yesterday on data from the Energy Information Administration (EIA) that showed US crude inventories last week climbed to its fifth straight week of record highs but by just 1.3 million barrels, a much smaller build than forecast.

 The EIA also reported that US gasoline demand over the past four weeks was up 6.4 per cent from a year ago.

As part of the collaborative efforts between OPEC and non-OPEC producing countries to freeze crude oil output in an attempt to prop up prices, the two groups would hold a meeting in Doha, Qatar on April 17.

Before this development, Saudi Arabia and several fellow OPEC members had agreed with non-OPEC Russia to freeze output at January levels in an attempt to prop up prices.

The renewed cooperation between OPEC and non-OPEC members had led to a rise in the price of oil above $40 per barrel but that was still a fraction of the $115 per barrel of almost two years ago.

 However, Iran’s latest position that it would only join the discussions for cooperation after its output has hit 4 million barrels per day (mbpd), had led the price to slump below $40.

Iran’s oil exports are due to reach 2mbpd in the Iranian month that ends on March 19, up from 1.75 million in December 2015.

But Thursday’s announcement by Qatari Oil Minister, Al-Sada, who is also the President of OPEC that the members of the cartel and non- member producers would meet in Doha on April 17 will likely renew confidence in the oil market.

“This comes as a follow-up to the meeting that was held last month in Doha between Qatar, Saudi Arabia, Russia and Venezuela at which they proposed an accord to freeze oil output at January 2016 levels and called on other producers to do so,” Bin Saleh Al-Sada was quoted by Reuters as saying in a statement.