Oil Nears $34 on Production Cut Hopes

Brent down around 10.5 percent this month.

Oil rose towards $34 per barrel on Thursday, hitting a three-week high and bouncing well off a 12-year low set this month, supported by the possibility that major producers may cooperate to cut production.

Russian Energy Minister Alexander Novak said on Thursday that it was reasonable to discuss the situation on the oil market and that exporters group OPEC was trying to organise a meeting with other producers next month.

Members of the Organization of the Petroleum Exporting Countries such as Nigeria and Venezuela have called for cuts to bolster the oil price, which has halved since last May.

Until this week, however, there were few signs that the biggest producers were ready to make such a move.

"The fact that the bigger oil producers are talking in these terms is limiting the downside," Michael Hewson, chief market analyst at CMC Markets, said.

Brent crude was up 34 cents at $33.44 a barrel by 1223 GMT, after gaining 4.1 percent in the previous session. A session high of $33.99 marked its highest level since January 8.

It was around $6 higher than the 12-year low set this month, although still down around 10.5 percent this month after a 16 percent slump in December.

U.S. crude was down 3 cents to $32.27 a barrel. It settled the previous session up 85 cents, a 2.7 percent gain.

Saudi Arabia's deputy minister for company affairs at the Ministry of Petroleum and Mineral Resources said on Thursday in Tokyo that OPEC estimates global oversupply to be around 2 million barrels per day (bpd).

"It will take some time for the market to rebalance," said Aabed A. Al-Saadoun. "We feel that the market will begin to come into balance in 2016 and that demand for energy in all forms will continue to increase."

The Energy Information Administration said on Wednesday that U.S. crude inventories climbed by 8.4 million barrels last week, higher than analyst expectations for a rise of 3.3 million barrels.

That brought crude inventories to the highest level since the EIA began tracking the data.

However, investors overlooked this seemingly bearish data and focused on crude stocks at the Cushing, Oklahoma delivery hub, which fell by 771,000 barrels.

"Cushing was a crisis zone because it was getting close to capacity, so there is some relief for the inventory overhang," said Dominic Haywood, analyst at Energy Aspects.

By Simon Falush