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Prices Of Oil Increase More Than 4 Percent, Brent Crude Sells Up To $32 Per Barrel

By January 27, 2016 at 11:26 am
Prices Of Oil Increase More Than 4 Percent, Brent Crude Sells Up To $32 Per Barrel (Photo : Spencer Platt | Getty Images News)

NEW YORK - Amidst the on-going price volatility of oil, investors are seeing a glimpse of hope in the reduction of oversupply as prices of oil increased by more than four percent on Tuesday.

According to the report of Reuters, the prices of oil surged after the members of the Organization of the Petroleum Exporting Countries (OPEC) had once again called for rival producers to reduce their supply.

Hess Corporation, an American global oil producer, said "it planned to cut capital spending by 40 percent this year," resulting to more purchase of crude oil. Apparently, it prompted other U.S.-based oil produces to announce their plans of spending cuts as well.

"The positive sentiment stemmed from strong U.S. corporate earnings and talk of OPEC and Russia considering production cuts," wrote ANZ in a note. "We consider the likelihood of any agreement between these parties as extremely low."

Brent Crude, a major benchmark of worldwide oil purchases, had an increase of $1.30 or 4.26 percent, selling crude for $31.80 per barrel. It started with a price decline but went up to $32.72.

On the other hand, U.S. Crude had a 3.7 percent increase or $1.11, which costed each barrel at $31.45. But it went further up to $32.41.

Saudi Arabia, the top producer of oil among the members of OPEC, and non-OPEC member, oil producing country Russia are showing signs of willingness to discuss the global-scale problem of oil oversupply, Iraq's oil minister said.

Citi Futures energy specialist Tim Evans also shared his thoughts, saying that it is still unsure whether Saudi Arabia and its OPEC allies are ready to talk about cutting their supply of crude oil.

"Without Saudi Arabia on board, there's simply no deal and the market will be left to rebalance naturally as non-OPEC output declines, a slow and still painful process," wrote Evans.

Despite the uncertainties of cutting the supply by major oil-producing countries, Price Futures Group analyst Phil Flynn said the move made by Hess Corporation might trigger more capital spending cuts by American producers. He also observed that there is positive reaction when there is positive news.

"I think you're going to see more capital spending cuts - it usually happens when prices start to bottom out," he said.

"It's significant that the market is now reacting positively to positive news, which means some of the fear is now starting to subside."

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