WTI Crude Rises as White House Plans Debt-Ceiling MeetingMark Shenk
West Texas Intermediate crude rose after the White House said the president and vice president will meet with congressional leaders this afternoon, spurring optimism that a deal will be reached to lift the debt ceiling.
Futures climbed 0.4 percent. President Barack Obama and Vice President Joe Biden plan to gather in Washington with the top Republicans and Democrats in the House of Representatives and the Senate. WTI slid earlier as Senate leaders wrapped up almost four hours of debate without resolution. The U.S.’s borrowing authority is due to lapse in three days. A partial government shutdown began Oct. 1.
“It’s important that Biden is getting involved,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “He has been involved in previous budget deals that have worked out and has been excluded so far this time around.”
WTI crude for November delivery rose 39 cents to settle at $102.41 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 27 percent below the 100-day average at 3:37 p.m.
Brent oil for November settlement fell 24 cents to end the session at $111.04 a barrel on the London-based ICE Futures Europe exchange. Volume was 26 percent lower than the 100-day average. The European benchmark traded at an $8.63 premium to WTI at the close, narrowing for the first time in six sessions.
The Washington meeting will include House Speaker John Boehner and Senate Minority Leader Mitch McConnell, both Republicans, and Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats, according to a White House statement. Senator Joe Manchin, a West Virginia Democrat, said as he left Reid’s office that he expected the Senate leaders to present an agreement to Obama at the meeting.
Equities and commodities gained after the talks were announced. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average rose 0.4 percent. S&P’s GSCI Index of 24 raw materials increased 0.1 percent.
The congressional deadlock is threatening the U.S. and world economies, Christine Lagarde, managing director of the International Monetary Fund, said on NBC’s “Meet the Press” program yesterday.
Oil traders are losing a key weekly report on supplies because of the U.S. government shutdown, threatening to reduce market volume and boost volatility. The Energy Information Administration ceased operations and furloughed staff, stopping publications such as the 34-year-old Weekly Petroleum Status Report on Wednesdays, which includes crude and gasoline data. The Commodity Futures Trading Commission has also suspended its Commitments of Traders reports on Fridays.
The suspension at the EIA, the Energy Department’s statistical arm, means the market will turn to commercial reports from organizations such as the American Petroleum Institute, an industry-funded group that gives paying subscribers first access to the information. The API reported on Oct. 9 that U.S. crude supplies rose 2.76 million barrels in the week ended Oct. 4.
“The market has priced in a lot of the D.C. antics already,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We will probably grind even lower if the API reports another good-sized build in crude stocks.”
Iran’s Foreign Minister Mohammad Javad Zarif, the highest-ranking official taking part in nuclear negotiations starting tomorrow in Geneva, said more meetings will probably be necessary before progress is likely toward ending the standoff. Diplomats from China, France, Germany, Russia, the U.K. and U.S., the so-called P5+1, will meet their Iranian counterparts for two days of talks in the Swiss city.
“We are trading in an information vacuum with the lack of the CFTC and Energy Department reports,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The market will be looking for direction from the API report tomorrow and the Geneva talks on Iran’s nuclear program.”
It’s the first round of negotiations over Iran’s nuclear program since Hassan Rouhani was elected president. Sanctions have hindered its ability to export oil. Iran, the Organization of Petroleum Exporting Countries’ second-biggest producer in June 2012, was in sixth place last month, according to a Bloomberg survey of companies, producers and analysts.
“Potentially, Iranian barrels come back into the market and that pushes Brent down,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.
U.S. government offices are closed today for Columbus Day, though the equity and commodity markets are open.
“The markets are more skittish than usual because this is a semi-holiday with low volume,” said Tom Finlon, Jupiter, Florida-based director of energy fund Energy Analytics Group LLC. “The market easily moves on the relatively low volume we’ve got here.”
Implied volatility for at-the-money WTI options expiring in December was 21.1 percent, up from 20.1 percent Oct. 11, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 401,115 contracts as of 3:37 p.m. It totaled 801,524 contracts Oct. 11, 37 percent higher than the three-month average and the most since July 19. Open interest was 1.85 million contracts.