By Simon Falush
LONDON (Reuters) - Oil surged as much as 8 percent to above $35 per barrel on Thursday, hitting a three-week high and bouncing sharply away from a 12-year low set this month, as expectations built that major producers may cooperate to cut output.
Oil is up around 30 percent from its lowest since 2003 set earlier in January. Gains have gathered pace this week on speculation that Russia and OPEC may agree to reduce production.
Russian Energy Minister Alexander Novak said Saudi Arabia had proposed to cut oil production by up to 5 percent by each country in order to support weak prices.
"If there was a cut it would be very bullish and there's a reaction that's pushing oil higher," said Brenda Kelly, head analyst at London Capital Group.
Brent crude was up $2.03 at $35.13 a barrel by 1425 GMT, more than 6 percent higher after gaining 4.1 percent on Wednesday. A session peak of $35.84 marked its highest level since Jan. 6, and represented a gain of more than 8 percent.
U.S. crude was up $1.82 at $34.12 a barrel. It settled the previous session up 85 cents, a 2.7 percent gain.
Russia's Novak said on Thursday that it was reasonable to discuss the situation on the oil market and that the Organization of the Petroleum Exporting Countries was trying to organise a meeting with other producers next month.
Kelly said the proposed cuts were unlikely to happen.
"There have been attempts in the past that have come to (nothing). Saying something about the oil price and doing something are very different things, and it seems like panic given the price drop."
Some OPEC members including 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 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.
(Additional reporting by Meeyoung Cho in Seoul, Osamu Tsukimori in Tokyo and Henning Gloystein in Singapore; editing by Dale Hudson and Jason Neely)
