Oil rises as Russia sees support for output freeze

Oil prices rose on Tuesday on increasing optimism over a output freeze to shore up the market as Russia said domestic oil groups supported the proposal. (AFP Photo)

NEW YORK: Oil prices rose on Tuesday on increasing optimism over a output freeze to shore up the market as Russia said domestic oil groups supported the proposal.

US benchmark West Texas Intermediate (WTI) for delivery in April climbed 65 cents (1.9 per cent) to US$34.40 a barrel on the New York Mercantile Exchange. Brent North Sea crude for May, the European benchmark for oil, gained 24 cents (0.7 per cent) to US$36.81 a barrel in London.

"The market continues to be driven by expectations we're going to see a tightening of supply and demand fundamentals," said Gene McGillian of Tradition Energy. McGillian pointed out that Brent prices were up about 40 per cent since January, when they hit the lowest level since 2003.

The market, under sustained pressure from abundant supplies, gained a lift in the latter half of February when OPEC kingpin Saudi Arabia and non-OPEC member Russia agreed to freeze output to January levels, if other major producers followed suit.

But disappointment that there was no output cut, and skepticism that such a freeze could be agreed, has contributed to recent market volatility. "Today the Russians repeated they think they'll have their production freeze agreement slated for approval in March," McGillian said.

Opening a meeting with Russian oil group chiefs, President Vladimir Putin said Energy Minister Alexander Novak had led discussions on forging a freeze agreement between producer countries.

He said the idea was to "fix Russia's 2016 production level at that of January," which was a post-Soviet record of 10.8 million barrels per day on average." As the minister reported to me, you all agree with this proposal," he said in comments released by the Kremlin.

OPEC member United Arab Emirates also voice support. "I believe that current prices will force everyone to stabilize production" at January levels, Emirati Oil Minister Suhail al-Mazrouei said, according to state news agency WAM.