Tokyo: Oil rose, paring a sixth weekly loss, amid growing confidence that Opec and its partners will reduce production to avert a glut next year.
Futures in New York rose 1.8 per cent Friday, trimming the weekly drop to 4.6 per cent. With the Organisation of Petroleum Exporting Countries seeing waning demand for its oil, the group and its allies are said to be considering bigger-than-expected cuts despite criticism from President Donald Trump. In the US, government data showed stockpiles climbed the most in 21 months last week.
Oil is in a bear market after plunging from a four-year high in October as the US granted surprise waivers allowing some Iranian oil flows to continue even after sanctions took effect. Meanwhile, the demand outlook remains uncertain amid trade tensions between the US and China, and speculation is swirling over Opec’s output strategy before it meets partners in Vienna in December.
“It looks likely that Opec will cut production again after all,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “But creating an artificial supply squeeze won’t work in the long term, as they will need to keep cutting each year to keep prices high.”
West Texas Intermediate for December delivery traded up $1 at $57.46 a barrel on the New York Mercantile Exchange at 11:50am. London time, after advancing 21 cents on Thursday. Total volume traded was about 23 per cent above the 100-day average.
Brent for January settlement rose $1.22 to $67.84 a barrel on the London-based ICE Futures Europe exchange. The contract has dropped 3.3 per cent this week. The global benchmark crude traded at a $10.17 premium to WTI for the same month.
As oil was mired in a record 12-day losing streak earlier this month, Saudi Arabia proposed an Opec output cut of 1 million barrels a day, a U-turn from a June decision to boost supply. People familiar with the matter said the curbs may be even bigger. Still, the effect on benchmark prices may be “muted,” according to Morgan Stanley, as the current glut is in light-sweet crude varieties, whereas Opec would primarily cut medium and heavier grades.
Investors are also assessing signals from Opec’s key ally, Russia. President Vladimir Putin said Thursday an oil price of “around $70 suits us completely.” Energy Minister Alexander Novak also suggested earlier this week that the country is in no rush to act.
Meanwhile, rising US crude inventories have added to oversupply concerns. US stockpiles rose by 10.27 million barrels last week, the Energy Information Administration said Thursday. That compares with expectations for a 3.2 million-barrel increase. Production edged higher to a record 11.7 million barrels a day.