Oil surged following signals that the world’s biggest crude exporters may extend or deepen supply cuts.
Futures advanced 2.7 percent in New York for the biggest gain in two weeks. OPEC Secretary-General Mohammad Barkindo said more nations may join production limits the group hammered out with Russia and other exporters in late 2016, while the Saudis plan to restrict their own sales by a record amount within weeks. The falling value of the US dollar also spurred some investors to buy because crude is priced in the currency.
“There is a sense that we’re going to get a deal done,” Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, said by telephone. Saudi Arabia’s announcement that it’ll sell fewer barrels than ordered next month “is a sign that they are going to continue to be serious. If you are going to cut to your customers in November, it’s probably a clear sign that you expect these production cuts are going to continue.”
Oil has struggled to hold above $50 a barrel as rising output from US shale explorers diminished the impact of supply curbs implemented by the Organization of Petroleum Exporting Countries and allies such as Russia. Macquarie Bank said OPEC probably will extend output cuts through at least the third quarter of next year and perhaps to the end of 2018.
“We have OPEC and Russia signaling that they are at least contemplating the possibility of taking robust action to lift the market. That’s going to convince people to be comfortable going long here,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “The market is getting convinced that there are growing signs that this oversupply is eroding.”
West Texas Intermediate for November delivery added $1.34 to settle at $50.92 a barrel on the New York Mercantile Exchange, the highest level in more than a week. Total volume traded was about 14 percent below the 100-day average.
Brent for December settlement advanced 82 cents to end the session at $56.61 on the London-based ICE Futures Europe exchange, and traded at a $5.38 premium to WTI for the same month.
The Bloomberg Dollar Spot Index, a gauge of the dollar against 10 major peers, fell as much as 0.5 percent.
A measure of oil market volatility dipped to the lowest level since April. WTI has traded between $45 and $53 a barrel since the end of August.
Investors aren’t “afraid that there is going to be a type of situation that will cause oil to break $10 or rally $10 in a short period of time anytime soon,” Flynn said.
A Bloomberg survey showed that US crude supplies probably shrank by 2.4 million barrels last week while distillate stockpiles declined by 1.9 million. At the Cushing, Oklahoma, pipeline hub, crude inventories likely increased by 1.8 million barrels, according to a separate forecast compiled by Bloomberg.
The industry-funded American Petroleum Institute will release its inventory data on Wednesday, a day later than usual, due to the US Columbus Day Holiday.
Iraq and Iran boosted crude exports in September, taking advantage of a slower pace of shipments from Saudi Arabia to win buyers in key markets like China and the US Barkindo said North American shale producers should share responsibility in curbing the worldwide supply glut. Iraq’s Oil Minister Jabbar al-Luaibi ordered repairs to the country’s northern export pipeline to Turkey. The link was disrupted during fighting against ISIL.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.