Oil prices soar on production rumors, U.S. labor

NEW YORK, Jan. 28 (UPI) -- Strong U.S. labor figures and potential cooperation between Russia and some OPEC members pushed crude prices well into the black in early Thursday trading.

The U.S. Labor Department reported the number of applications for unemployment assistance declined 16,000 to a seasonally adjusted 278,000. The four-week average declined less substantially by 2,250 to 283,000.

Crude oil prices rallied in response to the sense of optimism from the United States, where labor has improved despite weakness elsewhere in the global economy. Brent shot up more than 5.7 percent in early trading to move just above $35 per barrel in early Thursday trading in New York. West Texas Intermediate, the U.S. benchmark price for crude oil, gained 5.4 percent to start the day at $34.07 per barrel.

Thursday's rally was supported by reports that Russia may be in talks with members of the Organization of Petroleum Exporting Countries to curb production. An informal poll taken by Russian news agency Tass finds the probability of such a decision to be "very high."

Saudi Arabia, the de facto head of OPEC, has stood by a robust production policy, saying it wanted to protect its market share on the expectation that demand would eventually return. Crude oil prices are facing negative pressure because markets are flush with oil as global economic momentum slows, a trend reflected in emerging weakness in China.

Vladimir Averchev, a market analyst and former director with BP's offices in Russia, told state-run media any talks of an agreement to cut output was welcome news.

"If the talks of oil producing countries yield a positive result, this circumstance will give a long-term effect of oil price growth," he said.

So far, mentions of a joint agreement are only rumors. Both Saudi Arabia and Russia have faced economic headwinds because of the low price of crude oil.

Markets suffered a loss Wednesday, meanwhile, when the U.S. Federal Reserve stood pat on interest rates, opting for a wait-and-see approach on the steps needed in an uncertain market. The Fed noted, however, that inflation was below its 2 percent guidance in part because of lower energy prices.

Crude oil prices have been extremely volatile in recent weeks. A 9 percent rally Friday was all but erased the next full trading day.