Oil pumping jacks, also known as nodding donkeys, operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020. (Photo by Getty Images)

Oil prices rose Thursday as the world’s largest oil producers are expected to agree to slash output as part of an effort to shore up coronavirus-hit energy markets.

Brent crude futures had a rise of 2.5 %, or 81 cents, reaching $33.65 a barrel as of 0034 GMT. The contract increased to an intra-day high of $33.90, climbing for a second day.

US benchmark West Texas Intermediate rose by 4.3%, or $1.08, at $26.17 a barrel in afternoon Asian trade, having climbed as much as 6%.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will convene a video conference meeting later in the day.

This comes as a day earlier Russia expressed its willingness to cut output by 1.6 million barrels a day, or about 15%, raising hopes that the major producers will seal a deal.

The upcoming meeting is likely to be more successful than a March gathering, where the OPEC and allies failed to agree to extend supply cuts, triggering a price war between Saudi Arabia and Russia.

The new agreement is expected to cut between 10 million and 15 million barrels per day (bpd).

That reduction would be a great deal bigger than any production cut OPEC has ever agreed on before.

We’re waiting with bated breath, said Lachlan Shaw, head of commodity research at National Australia Bank.

I think there’ll be a deal, which will bring a bit of cheer in the short run. Then everyone’s attention will refocus on the fundamentals. The fundamentals are appalling, he said.

After the meeting, energy ministers from the Group of 20 major economies are also slated to hold another meeting aimed at finding ways to help ease the impact of the coronavirus pandemic on global energy markets.

If the G20 came out and talked about adding to strategic reserves, that would be taken positively, Shaw said.

Meanwhile, Kuwait’s Oil Minister Khaled al-Fadhel has reportedly said top producers plan to cut production by between 10 and 15 million barrels per day.

The goal here is to restore balance to the market and prevent further drops in the prices, Fadhel said in an interview with Kuwaiti daily Al-Rai published Thursday.

In addition, Algerian Energy Minister Mohamed Arkab, also OPEC president, told Algerian state news agency APS that the meeting will undoubtedly be fruitful in order to rebalance the market through measures we will take tomorrow.

Despite the optimism, analysts are dubious about how effective an OPEC+ cut would be in raising prices given the fact that oil prices have lost half their value since the start of the year and oil demand was forecasted to fall as much as 30%.

Ultimately, the size of the demand shock is simply too large for a coordinated supply cut, Goldman Sachs said in a note.

Furthermore, considering the rapidly rising oil inventories, the market might be still awash with cheap oil even when demand rises.

A cut of just 10 million barrels a day might not trigger much of a rally and probably eventually see selling pressure drive crude back to the low-mid $20s, said Edward Moya, senior market analyst with OANDA.

Moya also cautioned that a turn for the worse could happen, which derails an agreement, noting that the following 24 hours will be critical for global oil prices.

SOURCE: PRESS TV