Oil rose the most in eight weeks as U.S. production continued to slide ahead of producers meeting to discuss production cut.
Crude slid to the lowest in over a decade in February after reaching 26 dollar a barrel before rebounding on signs producers will freeze output. Prices have whipsawed this week amid speculation over whether an agreement to freeze output can be reached. Saudi Arabia said it will only agree to a freeze if it’s joined by other suppliers including Iran, while Kuwait insists a deal can be reached without Tehran’s support.
“There’s a lot of nervousness about the April 17 meeting and what it will mean for the market,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “We’re still hemmed in a range below $40. Breaking through would be very bullish for the market.”
Futures surged 6.6 percent in New York as output slid for the 10th time in 11 weeks, according to data from the Energy Information Administration on Wednesday. The number of active oil rigs in the U.S. dropped to the lowest level since 2009 this week, Baker Hughes Inc. data show. Major producers from Saudi Arabia to Russia will meet in Doha on April 17 to discuss freezing output in a bid to stabilize prices.
As speculators continues to drive prices ahead suppliers meeting, some analysts have said this current rally is not sustainable considering current global economics.
“Prices just flop back and forth,” said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston. “The market is extremely psychotic, subject to sharp reversals on inconsequential information.”
“I’m not buying this rally,” said Stewart Glickman, an equity analyst at S&P Capital IQ in New York. “We went from $26 to $41 on optimism that something will happen to curb supply. The risks of a sharp downturn remain greater than those for a rally.”