Oil prices extend gains as Iran welcomes output freeze

Oil prices extended gains in Asia today as traders welcomed comments from Iran's oil minister praising a conditional agreement between Saudi Arabia and Russia to freeze output levels, fuelling hopes for stability in the commodity market.

Bijan Zanganeh said Tehran will "support any measure that can stabilise the market and increase prices" but stopped short of committing Iran to any curbs.

His remarks came after he met his Iraqi, Venezuelan and Qatari counterparts in Tehran yesterday where they held their own talks on the global supply crisis.

On Tuesday Saudi Arabia and Russia, the two biggest producers in the world, agreed to limit their pumping but only if others followed suit.

While much-needed output cuts have not been announced, traders consider the latest developments a step in the right direction and providing a much needed respite after crude flirted with 13-year lows last week.

At around 0900 IST, US benchmark West Texas Intermediate for delivery in March was up 58 cents, or 1.89 per cent, at USD 31.24 and Brent crude for April climbed 37 cents, or 1.07 per cent, to USD 34.87 a barrel.

Yesterday WTI jumped more than seven percent while Brent added 5.6 per cent.

"Prices soared sharply after the announcement (of the conditional freeze) but gains were pared as the market was concerned that the provisional agreement would not gain wide acceptance, especially from Iran, which is set to ramp up production to pre-sanction level," said Sanjeev Gupta, who heads the Asia oil and gas practice at EY.

"However, a supportive statement by the Iranian oil minister restored prices."

Phillip Futures analyst Daniel Ang said any move by Iran agreeing to production cuts will be crucial because they are just ramping up output after nuclear-linked Western economics sanctions were lifted in January.

"If they tone down production and agree to slowing it down or even helping the whole situation then I think that will be a win," Ang told AFP.

In a sign of how the slumping prices are hurting oil- dependent economies Venezuela yesterday ramped up gasoline prices for the first time in two decades, by roughly 6,000 percent and devalued the bolivar currency.

Analysts will be keeping an eye on the release later today of the weekly US Department of Energy inventory report.