Update Oil rebounds on investor optimism over producers' deal

by **Cals** Thu 18 Feb 2016, 02:04

Update

[size=28]Oil rebounds on investor optimism over producers' deal

By Reuters / Reuters | February 17, 2016 : 1:17 PM MYT

SINGAPORE (Feb 17): Crude oil futures rebounded on Wednesday on investor hopes that a deal between Saudi Arabia and Russia to freeze oil output at January levels would lead to a wider pact among producers that could eventually see production cuts to support prices.

Brent crude had climbed 34 US cents to US$32.52 a barrel by 0455 GMT, after settling down US$1.21 in the previous session. It had surged to US$35.55 a barrel in early trade on Tuesday.

US crude was up 19 US cents at US$29.23 a barrel, having ended the last session down 40 US cents.

Top oil producers Russia and Saudi Arabia on Tuesday agreed to limit oil production at January levels, provided other oil exporters joined in, but stopped short of agreeing cuts in oil output.

Iraq, Qatar and Venezuela said they would freeze output at January levels provided a deal could be agreed, while OPEC member Iran could be offered special terms to freeze oil production levels, sources said.

Oil prices initially surged on Tuesday on news of the deal but early gains were wiped out by the realisation that there would be no immediate supply cuts to tackle global oversupply.

"It was a 'buy the rumour, sell the fact' event," said Ben Le Brun, market analyst at Sydney's OptionsXpress.

"The market is coming around to the idea that it is not bad news, but not as good news as it was anticipating," he said, adding that investors were hoping for production cuts.

Moves to freeze output at January levels will make little difference to the overall supply-demand balance this year and won't be enough to clear the 600,000 barrels per day surplus projected for the year, analysts FGE said in a note on Wednesday.

"It could pave the wave for further action to be taken should the likes of Saudi Arabia, other OPEC members and Russia deem it necessary," FGE said.

April crude futures will remain range-bound, Singapore's Phillip Futures said in a note on Wednesday.

Saudi Arabia's oil production has stagnated at slightly more than 10 million bpd throughout 2015, meaning that "all that was achieved was an agreement to continue what they were doing", Phillip Futures said.

Investors are also eyeing US oil inventory data later on Wednesday for further direction on oil prices.

US crude stocks rose by 3.9 million barrels to 505.9 million barrels in the week to Feb 12, according to a Reuters poll of analysts on Tuesday.

Weekly inventory reports from industry group the American Petroleum Institute (API) and the US Department of Energy's Energy Information Administration (EIA) will be released on Wednesday and Thursday respectively, a day later than usual because of a public holiday on Monday.

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