Oil Rises After Worst Month Since July as OPEC Members Gather

Oil Supply, Demand Dynamics About to Change: Maratheftis
  • Saudi oil minister pledges to listen to other members Dec. 4
  • Gasoline gains as U.S. requires refiners to change fuel blend

Oil rose in New York after its biggest monthly decline since July as OPEC ministers arrive in Vienna ahead of this week’s policy meeting.

West Texas Intermediate futures climbed 0.5 percent. Saudi Arabia will discuss all issues and listen to concerns of other members at the Friday gathering, said the nation’s Oil Minister Ali al-Naimi. The Organization of Petroleum Exporting Countries pumped more than its quota in November, exceeding it for an 18th month, a Bloomberg survey showed.  Gasoline advanced after the U.S. changed blending requirements for the fuel.

Oil prices have fallen almost 40 percent the past year as a record surplus persisted amid global producers’ fight for market share. OPEC is meeting a year after Saudi Arabia led an agreement to keep production high and drive out higher-cost shale rivals in the U.S. Speculator short positions in WTI, bets that prices will drop, rose to the highest level since March, the U.S. Commodity Futures Trading Commission said Monday.

"We’re listening to the Saudis for clues, and they’re sending mixed signals," Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion, said by phone. "The market is so short that if anything conciliatory comes out of the meeting there will be a short-covering rally."

WTI, Brent

West Texas Intermediate for January delivery rose 20 cents to settle at $41.85 a barrel on the New York Mercantile Exchange. Total volume was 14 percent below the 100-day average at 4:43 p.m. Prices decreased 11 percent in November.

Futures retreated from the close after the American Petroleum Institute was said to report U.S. crude supplies climbed 1.6 million barrels last week. WTI traded at $41.60 at 4:42 p.m.

Brent for January settlement declined 17 cents to end the session at $44.44 a barrel on the London-based ICE Futures Europe exchange. It fell 10 percent in November. The European benchmark crude closed at a $2.59 premium to WTI.

"OPEC isn’t going to do anything this week," Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said by phone. "The market has been in a holding pattern the past two weeks, but should make another move lower eventually."

OPEC’s production dropped by 33,000 barrels a day to 32.121 million in November, led by declines from Nigeria and Libya, the Bloomberg survey oil companies, producers and analysts showed. While total output shrank, Saudi Arabia and Iraq, the group’s two biggest producers, pumped more oil than in October.

Iranian Viewpoint

Iranian Oil Minister Bijan Namdar Zanganeh sent a letter to OPEC calling for a cut in excess output, Mehr news agency reported Tuesday. The group should reduce current production to come back in line with its target of 30 million, Zanganeh said.

U.S. crude stockpiles probably decreased by 800,000 barrels last week, according to the median estimate in a Bloomberg survey before an Energy Information Administration report on Wednesday. Stockpiles climbed to 488.2 million barrels through Nov. 20, almost 120 million above the five-year seasonal average.

Gasoline futures led gains after President Barack Obama’s administration on Monday ordered refiners to blend a record 14.5 billion gallons of ethanol into gasoline next year. Petroleum interests and biofuel supporters for years have sparred over whether the government should mandate higher blends of the fuel.

Stronger Demand

"Gasoline is the strongest market because low retail prices are spurring stronger demand," Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone. "There were concerns that the renewable fuel mandate would be increased more. There’s relief that didn’t happen and gasoline will be a little dearer."
 
January gasoline increased 5.61 cents, or 4.3 percent, to close at $1.363 a gallon in New York. Diesel for January delivery rose 1.48 cents, or 1.1 percent, to $1.369.

Regular gasoline at U.S. pumps slipped to the lowest level since February. The average retail price fell 0.2 cent to $2.038 a gallon Monday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.

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