Oil surges past US$40 per barrel

Oil surges past US$40 per barrel

For the first time this year, the price of oil has gushed over US$40 per barrel with expectations of the 20-month price rout coming to a halt.

Crude oil has risen by almost 50 per cent from lows of $27 a barrel after dropping US production and talks between Russia and Saudi Arabia alleviated fears that prices may fall below $20.

Last night Brent crude rose to highs of $40.81 and US West Texas Intermediate rose to $37.84.

Oil Analyst at Natixis, Abhishek Deshpande, said “Investors are responding to US production guidance that sounds very different from this time last year and talks between Opec and Russia have been taken as a good sign.”

The important factor has been the continuing fall in US rig numbers. They have frequently declined due to low oil prices and have fallen under 400 for the first time since the financial crisis, data says. Rig count was at 922 this time last year.

Saudi Arabia is still trying to negotiate a deal with Russia to cap oil production. Opec countries including Venezuela, Qatar, Nigeria and UAE will be present at the second round of discussions in Russia on 20 March, but Iran still remains against the production freeze deal.

The FTSE finished down and the price of iron ore jumped more than 20 per cent. Due to the jump, Rio Tinto (ASX:RIO) and BHP Billiton (ASX:BHP) stocks rose higher. Rio Tinto rose five per cent, BHP Billiton finished at 3.5 per cent, and Fortescue Metals (ASX:FMG) rose 24 per cent.