NEW YORK/LONDON Oil prices rose 7 percent on Wednesday, rebounding further from their lowest levels in a dozen years, after Iran voiced support for a Russia-Saudi-led move to freeze production to deal with the market glut.
Iranian Oil Minister Bijan Zanganeh met counterparts from Venezuela, Iraq and Qatar in Tehran for over two hours on Wednesday, saying the proposed production "ceiling" should be the first step towards stabilising the market.
Zanganeh, quoted by Tehran's Shana news agency, did not say explicitly say that Iran will keep its own output at January's levels, in line with the proposal that major producers including Russia and Saudi Arabia restrict output.
But the tacit endorsement from Iran helped pushed global crude benchmark Brent up more than $2 a barrel. Tehran has been the main obstacle to the first joint OPEC and non-OPEC deal in 15 years, after its pledge to recapture market share lost during years of sanctions.
Brent was up $2.25, or 7 percent, at $34.43 a barrel by 1:25 p.m. EST (1825 GMT).
Traders also cited options expiry in U.S. crude for the rebound. U.S. crude was trading $1.65, or 5.7 percent, higher at $30.69 a barrel.
"I'm pricing between $35 and $45 for Brent by summer, as we still have a daily surplus of up to 1.7 million barrels of oil to contend with," said Phil Davis, an independent crude trader at PSW Investments.
"But I don't see the panic move down below $30 happening again," Davis said. "That's just untenable."
Crude prices have fallen from highs above $100 a barrel with little resistance for most of the past 20 months, as new U.S. shale output added to near-record output by the Organization of the Petroleum Exporting Countries and other major producers such as Russia.
Iran's return this year as a global oil exporter following an agreement to curb the country's nuclear programme added further pressure to markets.
But after hitting 2003 lows beneath $30 last week, prices reversed course, surging about 12 percent on Friday alone after the United Arab Emirates said OPEC was ready to cooperate in bringing production down.
An Iranian official, speaking before the four-nation meeting, said Iran would continue increasing its oil output to levels held before the 2012 trade sanctions imposed on the fourth largest OPEC producer.
Wednesday's pact will make little difference to this year's overall supply-demand balance if Iran raises output by around 1 million barrels per day over the next six to 12 months, analysts said.
"The market needs a cut, not a production freeze," PVM analyst David Hufton said.
The market is also on the look out for U.S. inventory data due on later Wednesday, with U.S. crude stockpiles forecast to have risen 3.9 million barrels last week.
(Additional reporting by Ron Bousso in London; Editing by Chris Reese and Marguerita Choy)
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Updated Date: Feb 18, 2016 00:30 AM