Oil up 7 percent as Iran welcomes output freez

NEW YORK/LONDON: Oil prices rose 7 percent on Wednesday after Iran voiced support for a Russia-Saudi-led move to freeze production to deal with the market glut that had pressured crude prices to their lowest in a dozen years.Iranian Oil Minister Bijan Zanganeh met counterparts from Venezuela, Iraq and Qatar in Tehran for over two hours on Wednesday, saying the proposed production “ceiling” should be the first step toward stabilizing the market.Zanganeh, quoted by Tehran’s Shana news agency, did not say explicitly say that Iran will keep its own output at January’s levels, in line with the proposal that major producers including Russia and Saudi Arabia restrict output.An Iranian official, speaking before Wednesday’s meeting, said Iran would continue increasing its oil output to levels held before the 2012 trade sanctions imposed on the fourth largest producer in the Organization of the Petroleum Exporting Countries.Tehran has been the main obstacle to the first joint OPEC and non-OPEC deal in 15 years, after its pledge to recapture market share lost to sanctions.Even so, Zanganeh’s endorsement of the production freeze plan helped spark a powerful rally.Brent settled up $2.32, or 7.2 percent, at $34.50 a barrel.U.S. crude closed up $1.62, or 5.6 percent, at $30.66 a barrel.Prices extended gains in post-settlement trade after data from industry group the American Petroleum Institute showed a stockpile drop of 3.3 million barrels versus analysts’ forecasts for a build of 3.9 million barrels. The U.S. government will release official stockpile data on Thursday.Options expiry in U.S. crude also fed Wednesday’s rebound, some traders said.Some investors said they had a better outlook for oil now.”I’m pricing between $35 and $45 for Brent by summer, as we still have a daily surplus of up to 1.7 million barrels of oil to contend with,” said Phil Davis, an independent crude trader at PSW Investments.Others were more skeptical. “I think people will be in a wait-and-see mode,” said Scott Shelton, energy broker for ICAP. “Risk would be lower because of the volatility involved.”Traded volume in U.S. crude futures was just above 500 million barrels, lower than the past three sessions, Reuters data showed, despite the price gains and activity prior to options expiry.