Oil wipes out gains on fading hopes for output limit

A motorist pumps petrol at a kiosk. (Photo: AFP/Seyllou)

NEW YORK: Oil prices turned lower in late trade on Friday (Feb 26) as hopes fizzled for a fix in the global oversupply that could support prices.

Prices had jumped on Thursday after Venezuela raised expectations that it and other major producers would meet in March to try to find ways to stabilize the market.

The US benchmark West Texas Intermediate for delivery in April fell 29 cents to US$32.78 a barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for April delivery, the European benchmark for oil, dropped to US$35.10 a barrel, down 19 cents from Thursday's settlement.

Oil prices climbed sharply in morning trade after US economic growth data for the fourth quarter was upwardly revised to a 1.0 per cent annual rate, much better than expected. But the spike was short-lived.

Kyle Cooper at IAF Advisors said that the market had "gone too far" with a nearly 12 per cent gain in the WTI April contract from last Friday through Thursday.

A big catalyst had been Venezuelan oil minister Eulogio Del Pino's comments Thursday suggesting output talks by major producers would take place next month.

Venezuela, along with OPEC members Saudi Arabia and Qatar and non-OPEC Russia, announced last week a preliminary deal to freeze output at January levels, provided that other major producers followed suit.

Saudi Arabia, OPEC's largest oil producer, has ruled out a production cut and Iran has dismissed the idea it could join a freeze.

"The hype behind the headlines about freezing oil production doesn't appear very factual," Cooper said.

In the United States the number of active oil rigs dropped by 13 this week to 400, down 75 per cent from the 2014 peak, oil service provider Baker Hughes said Friday.

"Drilling activity in the US is currently at its lowest ebb since December 2009," Commerzbank said. "It is therefore clear that US oil production will continue to decline."