Oil rose on Wednesday, after having posted its third-biggest daily fall since the 2008 financial crisis the day before, supported by the possibility of major producers cooperating to tackle a supply glut that has sent prices to 12-year lows.
Iran’s oil minister said Tehran was ready to negotiate with Saudi Arabia and the Kremlin’s oil tsar Igor Sechin proposed producing countries reduce output by 1 million barrels per day – without saying whether non-OPEC member Russia would cut.
While traders and delegates from OPEC doubt any deal between the group and rival producers – which would be the first in over a decade – will happen, talk of it has boosted the market.
“If prices drop further, the chance for joint action increases and this in turn should prevent a further sharp drop in prices,” said Carsten Fritsch of Commerzbank. “Today’s gain is just a bounceback after yesterday’s sharp sell-off.”
Brent crude LCOc1 was up 52 cents at $30.84 a barrel by 6.55 a.m. ET. The price fell for a fourth straight session on Tuesday to end down 7.8 percent, marking its third-largest one-day decline since the depths of the U.S. subprime lending crisis in 2008. U.S. crude CLc1 rose 45 cents to $28.39.
Oil collapsed from above $100 in June 2014 to a 12-year low of $27.10 last month, pressured by oversupply and a 2014 change of policy by OPEC to focus on market share, not support prices.
The drop has squeezed producers’ oil income and is having a wider impact. Turmoil in financial markets, in which shares of the world’s biggest banks fell steeply this week, is partially caused by the low oil price, the head of BP said on Wednesday.
“Of course the turmoil is a big concern,” BP Chief Executive Bob Dudley told Reuters. “I’ve been traveling recently to major consuming countries like Japan and even they say they would like higher oil prices.”
Oil also gained support from a report showing a smaller buildup in U.S. crude inventories than forecast.
The American Petroleum Institute (API), an industry group, said crude stocks rose by 2.4 million barrels in the week to Feb. 5, less than the 3.6-million-barrel rise expected by analysts.
Investors will turn to the weekly supply report from the U.S. government’s Energy Information Administration, due at 1530 on Wednesday.
OPEC pointed to a larger oil supply surplus on the world market this year than previously thought as Saudi Arabia and other members pump more oil, making up for losses in non-member producers hurt by the collapse in prices.