Oil rose on Thursday after a Russian official said that Saudi Arabia had proposed that oil-producing countries cut output by up to 5 percent each, amid a global supply overhang that has depressed prices for over a year and a half.
Crude accelerated higher after Russian Energy Minister Alexander Novak revealed the proposed reductions in output, which would amount to about 500,000 barrels a day of cuts by Russia, one of the largest producers outside OPEC.
"Indeed, these parameters were proposed, to cut production by each country by up to 5 percent," Novak said. "This is a subject for discussions, it's too early to talk about."
Saudi Arabian officials did not immediately comment on the proposal but a senior Gulf OPEC delegate said: "Gulf OPEC countries and Saudi Arabia are willing to cooperate for any action to stabilize the international oil market."
If implemented, the output reductions could help ease a supply glut that caused oil prices to fall more than 60 percent since mid-2014. Prices hit their lowest level for more than 12 years last week.
Novak's comments helped send Brent crude up more than 8 percent to almost $36 a barrel and U.S. crude up almost as much to crest just below $35.
The buying quickly subsided and as of 11:46 a.m. EST, Brent futures for March delivery were up 74 cents, or 2.2 percent, at $33.84 a barrel. Delivery for the contract begins tomorrow.
U.S. crude was up 71 cents, or 2.2 percent, at $33.01 per barrel.
Novak also said that it was reasonable to discuss the situation in the oil market and that OPEC was trying to organize a meeting with other producers next month.
A senior Gulf OPEC delegate said that Gulf countries and Saudi Arabia are willing to cooperate on any action to stabilize the oil market.
Anticipation that OPEC and non-OPEC producers could coordinate production cuts has been around all week, and a closing gain on Thursday would be the third in a row.
But analysts and market watchers have been skeptical, saying it was unlikely a deal would emerge, particularly as Iran, which has boosted oil exports after the lifting of sanctions, seeks to recover its market share.
"The rally this morning isn't going to last," said Bill Baruch, senior market strategist at iitrader.com in Chicago. "It's a buy-the-rumor, sell-the-fact affair until we see something substantial.”
A media report that OPEC delegates said they had not heard yet of any plans for talks also tempered oil's initial gains.
"I haven't seen any official comments from the Saudi Arabians yet, so I think the latest push is just another wave of covering by the spec shorts," said Gene McGillian, Senior Analyst at Tradition Energy in Stamford Connecticut.
Short covering has been a major factor in oil's recovery from last week's lows. Speculators have raced to unwind some of the record-large bearish positions racked up over the last six months.