Oil prices soar above $35 on expectations of production cut by Russia and OPEC

Oil prices jumped as much as eight per cent rising above US$35 a barrel on Thursday amid talks that Russia and Saudi Arabia may agree to cut production rates.

Reuters reports that Russian Energy Minister Alexander Novak said Saudi Arabia had proposed to cut production by up to five per cent in order to support weak oil prices. Prices for a barrel of oil hit a three-week high and rose above a 12-year low set last week at $26.55 a barrel.

READ MORE: CIBC downgrades outlook for Canadian economy

Falling oil prices have caused the ruble to plunge to record lows, and Wednesday Nikolai Tokarev, head of Russia’s oil pipeline monopoly Transneft, hinted there would be co-operation between the Russia and OPEC producers.

“Saudi Arabia came forward with the initiative to have a discussion that would include the members of OPEC,” Russian news agencies quoted Tokarev as saying.

“In particular, we talked about oil prices, the measures everyone should take, what is going to change the situation for the better, including the negotiations in the framework of OPEC in general and bilateral options as well.”

North American stock markets got off to a positive start Thursday, with Canada’s main index up about one per cent after trading began in Toronto.

The Toronto Stock Exchange’s S&P/TSX index gained 129.23 points to 12,507.00, while the Dow Jones Industrial in New York average was up 132.92 points at 16,077.38, the broader S&P 500 index advanced 19.9 points to 1,902.91 and the Nasdaq 100 added 66.39 points to 4,195.25.

U.S. crude added $1.82, or 4.5 percent, to $34.12 a barrel in New York, in addition to a 6.5-percent increase over the last two days.

Brent crude, a benchmark for international oils, jumped $1.65 to $35.58 a barrel in London

The loonie was up 0.53 of a cent from Wednesday at 71.44 cents US as North American stock markets opened at 9:30 a.m. ET.

*With files from the Canadian Press