Oil prices surged by midday on Wednesday on comments from Russian officials hinting at possible coordination with OPEC on production cuts in an effort to arrest the decline in prices.
The day didn’t start off on such a positive note. The EIA reported a massive increase in oil storage levels – a jump of 8.4 million barrels last week. Inventories are at their highest levels in at least 80 years. That pushed oil prices down in early trading on Wednesday.
But by noon on the East Coast of the U.S., oil prices surged on news that the chief of Transneft – a Russian state-owned oil pipeline company – said that OPEC and Russia would meet to discuss possible production cuts. The news also helped push global stock markets into the green, as oil prices and stocks have recently started trading in a tight correlation with one another.Related: Only Recession Can Prevent An Oil Price Spike
Nevertheless, the news about potential Russia-OPEC cooperation should be taken with a grain of salt. Both sides have flirted with the idea for quite some time without making any progress on concrete action. Also, despite the comments from Transneft, top government officials have denied such conversations are taking place.
For now though, the markets are happy to take the rumors at face value. By midday, WTI was up nearly 3 percent to $32.34 per barrel, and Brent was up 3.5 percent to $32.94.
By Charles Kennedy of Oilprice.com
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