Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
[Jessica Summers, Bloomberg]
Oil jumped following signals that the world’s biggest crude exporters may extend or deepen supply cuts.
Futures advanced for a second day, adding 1.9 percent in New York. OPEC Secretary-General Mohammad Barkindo said more nations may join the production accord the group hammered out with Russia and other exporters in late 2016. In the U.S., a government tally scheduled for a Thursday release is expected to show crude stockpiles slid for a third straight week. The falling value of the U.S. 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 U.S. shale explorers diminished the impact of supply curbs implemented by the Organization of Petroleum Exporting Countries and allies such as Russia. The Saudis plan to ship 7.15 million barrels a day in November, “despite very strong demand” that exceeds 7.7 million, the kingdom’s energy ministry said.
“In their attempt to reassure the market of their determination to bring global stocks down, the company has decided to take the unusual step of going public with their November export plans,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “The kingdom’s intention is clear. Concrete and practical steps are being taken.”’
West Texas Intermediate for November delivery rose 93 cents to $50.51 a barrel at 9:47 a.m. on the New York Mercantile Exchange. Total volume traded was about 16 percent below the 100-day average. Prices climbed 29 cents to $49.58 on Monday.
Brent for December settlement advanced 78 cents to $56.57 a barrel on the London-based ICE Futures Europe exchange, and traded at a $5.71 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 Bloomberg survey showed that U.S. distillate stockpiles probably shrank by 2 million barrels last week. 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 U.S. 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 U.S.
- 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 Islamic State.
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