Crude futures rose in Asian trade on Thursday after Iran welcomed plans by Russia and Saudi Arabia to cap production, although analysts said the move would not lead to any output cuts and Tehran offered no action of its own.
After oil prices rose in the previous session as much 8 per cent, commentators suggested markets had overreacted to Iran’s support for the caps and said the Russian-Saudi move would not likely reduce the global surplus.
“I share the consensus view that producers are unlikely to reach an agreement (on cuts), the rationale being the need to satisfy two conditions,’’ said Ric Spooner, chief market analyst with Sydney's CMC Markets.
“First, any price gains must offset losses achieved from volume cuts — production cuts must be meaningful — sufficiently large to achieve a substantial price increase. And they will have to involve everybody — all the major (producer) players. That will be difficult to achieve,’’ he said.
Brent futures rose 21 cents to $34.71 a barrel by 0740 GMT, having closed 7.2 per cent higher in the previous session after hitting an intraday high of $34.99.
US crude gained 54 cents to $31.20 a barrel, having finished 5.6 per cent higher in the previous session after touching a high of $31.49.
Oil prices would likely remain volatile, Spooner said, as traders and investors reacted to news and rumours about curbs on output growth and possible cuts in production.
Iranian Oil Minister Bijan Zanganeh had met his counterparts from Venezuela, Iraq and Qatar on Wednesday but did not say if Iran would cap its output in keeping with the move by Russia, Saudi Arabia and Iraq.
“The agreement will do little to reduce the current supply glut,’’ BMI Research said in a note on Thursday.
A rebalancing in supply and demand is more likely in the second half of 2016, BMI said.
Iran’s OPEC envoy Mehdi Asali said it was “illogical’’ to ask Iran to freeze production levels in comments to the Shargh daily newspaper before the talks on Wednesday.
Iran had exported around 2.5 million barrels per day (bpd) of crude before 2012, but sanctions, imposed by world powers to curb Tehran's nuclear programme, cut its oil shipments to about 1.1 million bpd.
The sanctions were lifted last month, allowing Iran to resume selling oil freely in international markets.
Oil prices also gained support after US crude stocks unexpectedly fell by 3.3 million barrels last week to 499.1 million, data from the American Petroleum Institute had showed on Wednesday.
“We continue to eye crude production and would think that it should start to decrease. Should this happen, we would think that this could be the start of US production cuts due to low oil prices,’’ Singapore’s Phillip Futures said in a note.
Analysts had expected crude inventories to climb by 3.9 million barrels in the week to February 12, according to a Reuters poll on Tuesday.
Oil prices may gain further direction when the Department of Energy’s Energy Information Administration releases official oil inventory data later on Thursday.