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Oil Prices Trim Gains as Saudi Arabia, Russia Agree to Output Freeze

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MW-DP549_oil_ir_20150707114428_ZHCrude oil prices pared back from earlier sharp gains Tuesday morning, after energy ministers from major oil producers agreed to freeze output, but not to cut production.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in March CLH6, -1.77% rose 65 cents, or 2.2%, to $30.09 a barrel in the Globex electronic session. April Brent crude LCOJ6, -1.83% on London’s ICE Futures exchange were up 84 cents, or 2.6%, to $34.23 a barrel.

Earlier in the session, crude traded as high as $31.53 and Brent at $35.55 as investors waited to hear the outcome from a meeting of energy ministers from Saudi Arabia, Russia, Qatar and Venezuela taking place in Doha. The oil producers agreed to freeze output at January levels in a bid to stabilize the volatile oil market. But the deal is contingent on other major producers following suit, Dow Jones Newswires reported.

Oil prices have plunged more than 70% since June 2014 and could stay low for longer unless a drastic production cut helps to trim down the global supply glut. Major oil suppliers within the Organization of the Petroleum Exporting Countries — as well as other players, such as Russia and U.S. — have been unwilling to cut output because they want to defend their shares of the market.

Prices were further bruised after sanctions against Iran’s oil exports were lifted in mid-January. Over the weekend, Iranian officials said the country had increased exports by 400,000 barrels a day.

With the world awash in oil, global demand is drying up.

According to the International Energy Agency, global oil demand growth is likely to ease back considerably to 1.2 million barrels a day compared with 1.6 million barrels a day in 2015.

Despite waning global demand, production from Russia and OPEC has remained strong. OPEC’s latest report shows that in 2015, Russia’s oil production reached a record high of 10.8 million barrels a day. OPEC’s output also rose by 280,000 barrels a day to 32.63 million barrels a day, according to the IEA, which attributed the additional supplies to Iran, Saudi Arabia and Iraq.

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