London: Oil prices jumped on Friday on hopes of a coordinated production cut sparked by comments from the energy minister of OPEC (Organization of Petroleum Exporting Countries) member United Arab Emirates.
Still, analysts said such a move remained unlikely and prices for Brent and US West Texas Intermediate (WTI) crude were on track for weekly losses of more than 7 per cent and 11 per cent, respectively, as oversupply weighed.
Brent gained as much as 6 per cent against its previous settlement and was up 4.9 per cent at $31.53 per barrel at 0938 GMT (3:08 p.m. in India).
"The comments by the UAE oil minister are pushing prices up ...but we're still in a long-term downturn. That hasn't changed," said Hans van Cleef, senior energy economist at ABN AMRO. He said Friday's spike is "an indicator that it's not a one-way price movement anymore ...we will see a period of high volatility".
UAE Energy Minister Suhail bin Mohammed al-Mazrouei said OPEC was willing to talk with other exporters about cutting output.
He added that cheap oil was already forcing some output reductions which would help rebalance the market.
WTI futures gained as much as 6 per cent and were up 4.5 per cent at $27.39 per barrel at 0938 GMT after hitting lows not seen since 2003 in the previous session.
Traders said the jump in WTI prices could have been a result of US producers unwinding hedges they had locked in at higher prices in order to generate cash to service debt and costs.
Despite higher Brent and WTI, and the UAE comments, analysts said they saw little chance of OPEC and non-OPEC producers agreeing on a common policy.
"We view this as further jawboning, with the likelihood of a coordinated response on supply cuts very low," ANZ bank analysts said on Friday.
Oil prices have tumbled over 70 per cent since mid-2014 as producers pump 1-2 million barrels of crude every day in excess of demand as economic growth stalls, led by China's slowdown.
Volatility has been high this year, with 10-20 per cent price rises and falls common within only a few trading sessions.
"We expect recent crude volatility to persist," investment bank Jefferies said, adding that it expected oil markets to start rebalancing in the second half of the year.
© Thomson Reuters 2016