Oil prices jump on signs of US cutbacks, Doha hopes

A motorist pumps petrol at a kiosk. (AFP/Fadel Senna)

NEW YORK: Oil prices jumped on Friday (Apr 8) to cap a week of gains, helped by more indicators of slowing US output and hopes for an output freeze at the coming producers' gathering in Doha.

New York benchmark WTI for delivery in May gained 6.6 per cent to US$39.72 a barrel. In London Brent North Sea crude for June surged 6.4 per cent to US$41.94 a barrel.

Both contracts were up eight percent or more for the week, with falling US stockpiles and weaker output helping sentiment.

On Friday the picture of a prolonged slowdown in North American oil production was boosted by another fall in the number of active drilling rigs in the United States and Canada.

Total US rigs fell by eight last week to a multi-decade low of 354, according to the Baker Hughes weekly tally, compared to 760 a year ago.

Earlier in the week the US government reported another decline in domestic crude output to barely above nine million barrels a day after peaking at about 9.7 million barrels a day a year ago.

In addition, US commercial crude inventories unexpectedly slumped in the week ending Apr 1.

Together they supported buying in a market starved for signs of firming.

Traders were meanwhile setting their sights on the Apr 17 meeting, led by Russia and Saudi Arabia, to discuss measures to stabilize prices, including a production freeze at January levels.

The week continued to bring conflicting signals on how the meeting might go.

Prices fell last week after Saudi Deputy Crown Prince Mohammed bin Salman said his country would limit output only if fellow producer Iran did the same.

"Oil sold off sharply in the wake of comments by Saudi Arabia stating that there would be no deal without Iran, and then saw a bounce after Kuwait came out and stated that a deal could go ahead without Iran," said IG analyst Angus Nicholson.

"Positioning by different sides in the lead-up to the meeting is likely to keep the price highly volatile," added Nicholson.

Still, others clung to doubts about the prospects for a Doha production cap deal.

"Unfortunately, history is against anything coming out of the Doha meeting," analyst David Lennox of Fat Prophets in Sydney told AFP.

"But a lot of OPEC countries are feeling great economic pain, which might give them the impetus to take some positive action in cutting production," he warned.

James Williams of WTRG Economics said the oil market will probably trade in a rocky fashion ahead of the gathering.

"Between now and the Doha meeting, we're going to see the market go up and down a lot depending on which member of OPEC says what," Williams added.