Oil prices hit 2016 highs upon talks of production freeze

Offshore staff

HOUSTON Oil prices soared to 2016 highs on April 12, upon reports of an agreement between Russia and Saudi Arabia to freeze production in advance of the highly anticipated producer meeting in Doha, Qatar, later this week.

Brent and WTI ended yesterday above the 200-day moving average, Reuters said, which stood at $43.53 (Brent) and $41.04 (WTI) respectively.  The news service said that Brent crude futures were up 4.3% to $44.69/bbl and WTI up 4.48% to $42.17, a 2016 high and the best settlement since November.

At the time of this writing, prior to market close, Brent currently stands at $44.18/bbl and WTI at $41.80/bbl.

The Wall Street Journal, Reuters, and other organizations said yesterday that Russia’s Interfax news agency reported an agreement between top producers Russia and Saudi Arabia to freeze output, and that, contrary to previous reports and statements, the decision would not depend on Iran.

However, Gazprom deputy chairman Alexander Medvedev told ABC’s The Business that he had only heard news reports of this deal. However, he did acknowledge that “intense talks” were being held before Sunday’s Doha meeting. The Wall Street Journal said that both Russian and Saudi Arabian officials made “dismissive” comments toward the news. 

OPEC woes

The Doha meeting will be between both OPEC and non-OPEC producer countries, with Iran joining talks for the first time since the US lifted its sanctions.

Earlier this year, Saudi Arabia, a non-OPEC member Russia, and other OPEC members agreed to freeze output, leading the way for other suppliers to do the same. However, these hopes were dashed when Reuters reported that Iran officials pledged to continue ramping up its oil output to levels held before the country was hit by the 2012 sanctions.   

Efforts renewed in March when  The Wall Street Journal reported that Russian Energy Minister Alexander Novak said “a critical mass” of producers agreed to freeze their output. However, this movement also failed to gain traction when negotiations hit obstacles, and the freeze meeting postponed from March 20 to the April 17 Doha meeting.

An April 12 report from The Wall Street Journal said that investors were “bracing” for the Doha meeting and noted that “whatever the outcome, investors expect a big market reaction, with oil moving by as much as $5 in either direction.”


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