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Crude oil gains, sets 2016 record

West Texas Intermediate testing $41 per barrel in early Friday trading.

By Daniel J. Graeber
Crude oil gains, sets 2016 record
Crude oil prices posting a major rally on expectations major market players are moving in support of a meeting in Doha next month to consider a cap on production. File photo by Monika Graff/UPI | License Photo

NEW YORK, March 18 (UPI) -- Support for an April meeting on Doha to steady production levels gave crude oil prices a major boost Friday, though economic concerns continue to be a factor.

Members of the Organization of Petroleum Exporting Countries, along with Russia, have proposed capping output at January levels in order to stabilize crude oil prices, which last month dipped below $30 per barrel for the second time in 2016.

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Iran, which is fighting to regain its market position as sanctions pressures ease, said it would back a production agreement only after its own output increased to a level strong enough to regain its pre-sanctions influence. An OPEC official from an Arab country told the Wall Street Journal on condition of anonymity the position from Iran was "not a deal breaker."

Crude oil prices rallied Friday to their highest levels so far this year. Brent shot up 1.8 percent to $42.30 per barrel in morning trading, a gain of 7.7 percent for the week. West Texas Intermediate, the U.S. benchmark price for crude oil, moved 1.9 percent higher at the start of the day in New York to $40.96 per barrel, up 9.5 percent from Monday.

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Russia's oil minister this week warned a price above $50 per barrel might skew markets heavily toward the supply side as energy investors look to capitalize on the forward momentum for crude oil. The Russian Central Bank said Friday it was keeping key interest rates steady at 11 percent, pointing to lingering economic pressures.

"Oil prices picked up, inflation declined, recession slowed down, and the ruble appreciated," Elvira Nabiullina, the bank's governor, said in a statement. "However, there still remains high uncertainty with regard to further oil price dynamics, other external conditions, as well as the sustainability of positive trends recently observed in the Russian economy."

Baker Hughes, meanwhile, reported steady declines in rig activity, showing energy companies remained apprehensive despite the recent rally in crude oil. The U.S. rig count was down 1.8 percent to 480 for the week ending March 11. Year-on-year, the rig count is down 57 percent.

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