Oil prices jump again on hope of supply cut

U.S. crude rose more than 3 percent early on Tuesday to trade back above $30 a barrel building on last Friday's more-than-12-percent surge amid growing speculation over a deal. REUTERS  Hamad I Mohammed

Still, oil's deepening slide this year to below U$30 a barrel has put increased financial strain on oil-dependent economies and there has been growing speculation that there may be an opportunity to discuss a deal between the world's two largest exporters.

Ben van Beurden, chief executive of oil major Shell, said on Monday volatility in oil prices may stabilise later this year and that prices could rebound after that. Not all OPEC members have signed up to the deal - notably Iran and Iraq.

Oil prices on Friday surged as much as 12% after the Wall Street Journal reported that the United Arab Emirates' energy minister said Opec members were ready to reduce output.

Struggling oil producers have made repeated calls for an emergency OPEC meeting, but Kachikwu said that the timing had not been right.

Oil prices extended strong gains from the prior session on Monday, as investors were hesitant to bet on lower prices amid a renewed possibility of coordinated production cuts.

Oil prices have fallen to their lowest in more than a decade over the past year due to booming USA supplies and a decision by OPEC to ramp up exports which was aimed at driving higher-cost producers out of the market.

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Much has changed since OPEC's fractious meeting in early December, the last big gathering of key oil ministers, when members "were hardly talking to one another. Everyone was protecting their own positional logic", Kachikwu said.

Sources told Reuters that Saudi Arabia, which has so far opposed any production cuts, now seems to be backing down, saying it would cut output if non-Opec producers agreed to join it. In terms of production reduction or freezing, no, I don't think we have got there.

The prospect of cooperation between Iran and leading OPEC producer Saudi Arabia is complicated by the fact that the two countries are geopolitical foes that support different sides in conflicts in Syria and Yemen.

CNNMoney could not immediately confirm whether the meeting was taking place.

Though absent from the attendee list, Iran would likely show some restraint under any accord, tempering its goal of quickly pumping an additional 1 million barrels per day now that it has been relieved of sanctions.

In a research note, Danske Bank said the move would have little impact on reducing oversupply as "recent estimates suggest that both Russian Federation and Saudi Arabia produced at levels close to a record high in January".

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