Investing.com -- Crude futures surged on Thursday bouncing off multi-year lows amid a sharply weaker dollar, ahead of perhaps the most contentious OPEC meeting in years.
On the New York Mercantile Exchange, WTI crude for January delivery traded between $40.08 and $41.76 a barrel before settling at $41.09, up 1.17 or 2.92% on the session. For most of the session, WTI crude was on pace to post one of its strongest one-day moves of the year before paring some of the gains just before the close of trading. One session earlier, the front month contract for U.S. crude closed below $40 a barrel for the first time since late-August.
On the Intercontinental Exchange (ICE), brent crude for January delivery wavered between $42.61 and $44.69 before settling at $43.89, up 1.41 or 3.32% on the day. One day earlier, North Sea brent futures tumbled by nearly 4% to fall to its lowest level in six years. The spread between the international and U.S. domestic benchmarks of crude stood at $2.80, above Wednesday's level of $2.51 at the close of trading.
Both benchmarks of crude are coming off a dismal month when they each fell approximately 10% in value.
Although OPEC is largely expected to leave their production quota unchanged at Friday's key meeting, the pressure is reportedly building on Saudi Arabia to slash output from near-record highs. As prominent energy ministers from the 12-nation cartel arrived in Vienna on Thursday, reports surfaced that the oil kingdom could come under attack from a pair of cash-strapped South American members, which have faced economic peril in the face of crashing oil prices.
In November, OPEC production hovered around 32.1 million barrels per day, marking the 18th straight month that output eclipsed its production ceiling of 30 million bpd ceiling. Production in Saudi Arabia, the world's largest exporter, has averaged more than 10 million bpd for the majority of the year.
Venezuela, the sixth-largest producer in the cartel, will propose a 5% reduction in overall output, state-run newspaper Correo Del Orinoco reported, citing sources close to president Nicolas Maduro. In the months leading up to the meeting, Venezuela has recommended adopting price controls that would boost oil prices to $70 a barrel. Crude proceeds from Venezuela's state-run oil companies account for 50% of its government revenue, 95% of its exports and 25% of its GDP, according to the U.S. Council on Foreign Relations.
Any production cuts could tighten a wide supply-demand gulf worldwide that has persisted since OPEC resisted calls to slash output last November. As a result, crude prices have plummeted by more than 40%, amid a glut of oversupply on global markets. In an interview with Bloomberg, Ecuador hydrocarbons minister Carlos Pareja urged OPEC to reduce output to near 30 million barrels per day. Ecuador, though, has little clout as the second-smallest producer of the influential group.
Iran, meanwhile, is expected to resist any proposal that will force the Gulf state to cap output at 4 million bpd. Iran could ramp up production by as much as 1 million bpd over the next year, as Western powers continue to ease economic sanctions related to this summer's comprehensive nuclear deal.
Elsewhere, the dollar suffered one of its worst sessions of the year after the European Central Bank approved modest easing measures on Thursday, which fell far below market expectations. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 2.25% to an intraday low of 97.15, before rebounding slightly to 97.73 in U.S. afternoon trading.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.