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Speculation of change of policy

Fresh talk of Opec cut fails to stem market falls

BPGlobal markets remained bearish in spite of fresh hopes tonight that Opec was prepared to cut oil production to ease the current glut.

Oil prices briefly dipped to new 12-year lows before recovering slightly on the latest speculation reported in the US.

West Texas Intermediate fell 4.5% to $26.21 – the lowest since 8 May, 2003, when it hit $26 – before rebounding above $27 on comments by United Arab Emirates energy minister Suhail bin Mohammed al-Mazrouei that “OPEC members are ready to cooperate on a cut.”

Oil has fallen almost 75% since mid-2014 as producers have pumped between 1 million and 2 million barrels of crude daily above demand, just as China’s economy has slowed down.

Analysts are cautioning against an immediate switch of policy by the Opec nations. Two weeks ago, oil rose on the back of talk that OPEC and Russia were close to agreeing a cut in production.

Instead Opec increased output by 280,000 barrels per day to 32.6 million, according to data released this week.

There has also been talk that Iran, which is expected to increase production following the lifting of sanctions, was also ready to talk to Saudi Arabia.

However, Iran ramped up its production to nearly 3 million barrels a day in January — an 80,000 increase from December. Iraq has also stepped up output, hitting a record high of 4.35 million barrels a day in January.

US and Asian markets were less impressed by the rumours of action by Opec. The Dow Jones on Wall St fell as much as 400-plus points and the Nasdaq moved closer to a bear market, or 20% below its most recent high point.

The Hang Seng in Hong Kong dropped nearly 4%, while the Nikkei shed 2.3%. Sweden’s central bank pushed its key interest rate further into negative territory at -0.5%.

The FTSE 100 fell 135 points yesterday to a three year low.

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