Oil prices up as Saudis predict OPEC will reach output deal

Market Watch
Oil prices up as Saudis predict OPEC will reach output deal

Oil futures rose on Thursday after the oil minister of Saudi Arabia expressed optimism about the ability of the Organization of Petroleum Exporting Countries to agree on production freeze. "In general, it seems more likely that OPEC will announce some form of a deal  after the official meeting, because otherwise the markets fell sharply on oil prices,"  Robbie Fraser, a commodity analyst from the Schneider Electric said. Oil prices, however, fell slightly compared to the highs of the session. Fraser says that "the ability to move forward with any outcome of the meeting is a big question."

December West Texas Intermediate  CLZ6 rose by 0.64% or 31 cents to settle at $ 45.88 a barrel on the New York Mercantile Exchange, retreating from a high of $46.58. January  Brent crude LCOF7 the global oil benchmark added to its value  0.62%, or 26 cents,  to $ 46.89 a barrel on London’s ICE Futures exchange.

Saudi Energy Minister Khalid al-Falih is optimistic that OPEC will make good on a preliminary production-cut deal reached in Algeria in September. Al-Falih, who made his comments in an interview with Saudi-owned al-Arabiya TV, according to reports from Reuters and Bloomberg, said that targeting OPEC output of 32.5 million barrels a day will speed up the market recovery. But since the September meeting, some producer nations in OPEC, including Iraq, have asked to be exempt from any output cut deal and the group’s production in October climbed to a record of 33.83 million barrels a day.

Market experts also say that without the commitment of non-OPEC Russia, which is among the world’s largest oil producers, to cut or freeze production, OPEC members would be less inclined to scale back their own. News reports Wednesday quoted Russian Energy Minister Alexander Novak as saying that Russia would “support any decision” adopted by OPEC.

Comments from OPEC members, as well as non-OPEC Russia, who are apparently meeting on the sidelines of a forum in Doha, come less than two weeks ahead of the official Nov. 30 meeting in Vienna, where the 14-nation cartel that controls over a third of the world’s oil has said it planned to complete the output agreement that targets output of 32.5 million to 33 million barrels a day.

Hope for a final deal have helped to offset price pressure from a third straight weekly increase in crude inventories. The Energy Information Administration said Wednesday that U.S. stocks of crude oil jumped 5.3 million barrels last week, although the impact was cushioned by a fall in output and increased capacity utilization by refineries.

Meanwhile, the victory of Republican Donald Trump in the U.S. presidential elections could also pose a further threat to Brent crude-oil prices because his policies are seen as supportive of a recovery in U.S. shale oil production, a BMI Research report said. “Further relaxation of drilling and environmental regulations, coupled by faster approval of midstream infrastructure will lend support to the recovery in output under Trump,” the report said. “It is probable that his economic policies will take on a more protectionist bent, which is a net negative for global goods flows and export-dependent emerging markets. This would pressure oil demand to the downside, over a multiyear time frame,” adds BMI.

It forecast an annual average price of $55 a barrel and $53 a barrel for Brent and Nymex, respectively, for 2017. Back on Nymex, natural-gas prices extended their earlier losses after the EIA reported a weekly rise of 30 billion cubic feet in supplies of the fuel—matching expectations of analysts polled by S&P Global Platts. December natural gas NGZ16, +3.26%  ended at $2.703 per million British thermal units, down 6.1 cents, or 2.2%. Also on Nymex Thursday, December reformulated gasoline RBZ6, +0.04%  climbed 2.4 cents, or 1.8%, to $1.343 a gallon and December heating oil HOZ6, +0.93%  added 1.2 cents, or 0.8%, to $1.447 a gallon.

 

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