Oil may bounce back from 12-year lows as Opec mulls output cut

Crude oil prices are slowly bouncing back, in jerks and bouts, amidst protracted talks of a coordinated production cut by the Organisation of Petroleum Exporting Countries (Opec) and non-Opec oil producers.

Oil prices were up nearly 12 per cent on Friday following a report that Opec might finally agree to cut production to reduce the market glut.

Despite the strong daily gain, oil prices were poised to end the week down as much as 5 per cent.

North Sea Brent near-month futures closed $3.30 higher at $33.36 a barrel, after sliding below $30 on Thursday. The contract pared weekly losses to 2 per cent.

US sweet light crude for March delivery settled $3.23, or 12.3 per cent higher, at $29.44 per barrel, reaching a session high of $29.66. It hit a 12-year low of $26.05 the previous day and nearly 4.7 per cent for the week.

Traders were also skeptical about the report of a consensus after reports that Venezuela and Russia had earlier tried in vain to agree Saudi Arabia and other major producers to output cuts.
 
The Wall Street Journal reported on Thursday said citing United Arab Emirates' energy minister that the Opec was willing to cooperate on an output cut.

But despite the lack of understanding and cooperation among oil producers, the market expect oil to bounce back after a 75-per cent price slump since mid-2014 that has pushed crude prices to 12-year lows and that sooner or later due to tightening of production or a pick-up in demand.

Kuwait Petroleum International (KPI) today said oil prices could reach a range of $50-$60 a barrel by mid-2017, the official state news agency reported.

The agency quoted the company's top executive Bakheet al-Rashidi as saying that prices could reach the range of $60 to $80 a barrel in three years' time.

"The global oil market is going through a correction and we have reached the bottom," the news agency quoted him as saying, adding that Rashidi made his comments at a company event in London.

Rashidi attributed the drop in oil prices to excess supply in the market and slow demand from Asia, particularly China.