Brent oil climbs as Saudi Arabia said to meet for talks with Russia

Brent oil advanced above $34 a barrel as Saudi Arabia is said to meet with Russia in Doha on Tuesday to discuss the market.

Futures climbed as much as 4 per cent in London, rising for a third day. Saudi Arabia’s oil minister Ali Al Naimi will speak with his Russian counterpart Alexander Novak in the Qatari capital, according to a person familiar with the talks, who asked not to be identified because they are private. Venezuela will also attend and the person didn’t say what the agenda of the meeting will be.

Venezuela has lobbied exporters including Russia, Iran and Saudi Arabia to arrange a meeting between Opec members and other suppliers in an attempt to reach an agreement to balance the market. Oil is still down about 7 per cent this year amid the outlook for increased Iranian exports and BP predicts the market will remain “tough and choppy” in the first half as it contends with a surplus of 1 million barrels a day.

“The fact that there is going to be a meeting is an advance,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “There’s obviously a long way to go. The consensus view is that we’re about 12 to 18 months from achieving a balance in the oil market, even by maintaining the status quo. Making a decision to coordinate a supply reduction would just be ceding share to other producers.”

Brent for April settlement advanced as much as $1.33 to $34.72 a barrel on the London-based ICE Futures Europe exchange and was at $34.54 at 10.54am in Hong Kong. The contract rose 3 cents Monday to close at $33.39 after an 11 per cent gain Friday. The European benchmark crude was at a premium of $1.56 to West Texas Intermediate for April.

WTI for March delivery climbed as much as $1.50 to $30.94 a barrel on the New York Mercantile Exchange from the Friday close. There was no settlement Monday because of the US Presidents Day holiday. Trades will be booked Tuesday for settlement purposes. The contract gained 12 per cent to settle at $29.44 on Friday after dropping 19 per cent the previous six sessions.

Russia faces numerous obstacles in cooperating to cut output, even if president Vladimir Putin decides it’s in the national interest. Reducing the flow of crude might damage the nation’s fields and pipelines, require expensive new storage tanks or simply take too long. Production from a shut-in well might never be restored in full, Maxim Nechaev, director for Russia at consulting firm IHS, said by phone.

Russia’s largest oil producer Rosneft will supply its traditional markets with oil in a “competitive battle,” chief executive Igor Sechin said in London last week. He expressed doubts about any coordinated action by crude-exporting nations to curb output.

Iran, which was the second-biggest producer in Opec before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share after penalties were lifted. The nation has loaded its first cargo to Europe, while Chinese and Spanish companies have also booked shipments.

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