Oil prices climbed on Friday after tumbling 5 percent in the previous session on signs OPEC’s production cuts that start next month will be deeper than expected.
Benchmark Brent crude futures were up 27 cents, or 0.5 per cent, at $54.62 per barrel at 0448 GMT, after dropping $2.89 in the previous session. Brent is set to drop 9.4 per cent for the week.
US West Texas Intermediate (WTI) crude futures rose 33 cents, or 0.7 per cent, to $46.22 per barrel. WTI is set to decline about 9.5 per cent for the week.
Crude prices have fallen along with major equity markets as investors fret about the strength of the global economy heading into next year. Further concerns were raised as the United States, the world’s biggest oil consumer, may have a government shutdown later on Friday.
The Organization of the Petroleum Exporting Countries (OPEC)plans to release a table detailing output cut quotas for its members and allies such as Russia in an effort to shore up the price of crude, OPEC’s secretary-general Mohammad Barkindo said in a letter reviewed by Reuters on Thursday.
Barkindo said to reach the proposed cut of 1.2 million barrels per day, the effective reduction for member countries was 3.02 per cent.
That is higher than the initially discussed 2.5 per cent as OPEC seeks to accommodate Iran, Libya and Venezuela, which are exempt from any requirement to cut.
“The current oil prices will force OPEC to increase compliance with the production cut deals, supporting Brent prices,” said Wang Xiao, head of crude research at Guotai Junan futures.
“The temporary recovery in prices has been driven by short- sellers buying back,” said Wang, referring to investors buying futures to close out positions that profit from falling oil prices.
WTI and Brent futures are down more than 30 percent from their peak in October on concerns of oil demand will drop because of a slowing global economy and signs of a supply glut.
Stephen Innes, head of trading for Asia-Pacific at OANDA said in a note that market volatility was “getting exaggerated by immensely thin liquidity conditions, risk sentiment, and holiday market participation”.