Oil price up as Kuwait plans to freeze output

Oil price up as Kuwait plans to freeze output
Asia saw an increase in oil prices on Wednesday after Kuwait renewed hopes at a producers' summit for a deal that would freeze output levels.
2 min read
06 April, 2016
Kuwait said it could reach an agreement to freeze output [AFP]

Oil prices climbed in Asia on Wednesday after Kuwait said a deal to freeze output could still be reached during a producers' meeting this month, despite conflicting statements by participants.

But analysts said the rebound would not likely last, owing to a painful supply glut and weak demand caused by the slowing world economy.

At around 0430GMT Wednesday, US benchmark West Texas Intermediate for delivery in May was up 97 cents, or 2.70 percent, at $36.86 and Brent crude for June was 68 cents, or 1.80 percent, higher at $38.55.

Both contracts eked out an increase on Tuesday, but prices are still well below the $40 level reached last month, following a rally driven by hopes of an agreement during the 17 April producers' meeting in Doha.

Prices tanked after Saudi Deputy Crown Prince Mohammed bin Salman said last week his country would only agree to limit output if rival producers - such as Iran - followed suit.

But Iran, which has been raising production since the West lifted nuclear-linked sanctions in January, has insisted it should not be the one to cut back.

Key OPEC member Kuwait, however, said a freeze deal could still be reached without Tehran, Bloomberg News reported.

It quoted Kuwait's OPEC governor Nawal al-Fezaia as saying that major producers had no option but to reach an agreement and that a freeze could set a floor price.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said traders were likely to wait for the results of the meeting before making big bets.

"Given the welter of statements... people are probably just going to ignore (the comments) until they get the results of the meeting," Spooner told AFP by telephone.

Comments by International Monetary Fund chief Christine Lagarde that global economic recovery was still "too slow" and "too fragile" further added to the gloom in the saturated oil market, as it is bad news for demand, analysts said.