Oil Rises as OPEC Sec-General Says Group May Cut TargetMark Shenk
West Texas Intermediate climbed to a two-week high and Brent gained after OPEC’s secretary general said the group may cut output targets next year.
Abdalla El-Badri said today that the Organization of Petroleum Exporting Countries’ production quota could fall 500,000 barrels a day to 29.5 million barrels a day next year. El-Badri was speaking at OPEC’s secretariat in Vienna after talks with Russian Energy Minister Alexander Novak. WTI has tumbled 13 percent since touching $107.73 a barrel on June 20 as Asian and European economies have showed signs of slowing while crude output gained.
“After the significant decline in prices, investors were looking for a reason to get into the market and El-Badri’s comments gave them that,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “El-Badri said this was an outlook, not a decision, but the market is still taking it as a positive sign.”
WTI for October delivery rose $1.96, or 2.1 percent, to $94.88 a barrel on the New York Mercantile Exchange. It was the highest settlement since Sept. 3. The volume of all futures traded was 26 percent above the 100-day average at 4:38 p.m. Prices have decreased 3.6 percent this year.
Oil was little changed from the close after the American Petroleum Institute was said to report that U.S. crude supplies rose 3.3 million barrels last week by Bain Energy. WTI traded at $94.83 a barrel at 4:38 p.m.
Brent for November settlement increased $1.17, or 1.2 percent, to end the session at $99.05 a barrel on the London-based ICE Futures Europe exchange. Volumes were 11 percent lower than the 100-day average. The North Sea oil traded at a $5.24 premium to the November WTI contract.
“I am not really concerned about the prices declining at this short term,” OPEC’s El-Badri said. “I think the price will rebound by the end of the year. When we’re coming to the fall, things will look better.”
Saudi Arabia cut its crude production by 408,000 barrels a day to 9.6 million in August, the biggest reduction since the end of 2012, the kingdom said in a submission to OPEC.
OPEC officials, including Saudi Arabian Oil Minister Ali Al-Naimi, have said they see no urgent need to respond to oil’s drop. Prices “always fluctuate and this is normal,” Al-Naimi told reporters in Kuwait on Sept. 11. Oil will recover as demand for winter fuels climbs, Kuwaiti Oil Minister Ali Al-Omair said the same day. The group is next due to meet on Nov. 27.
“The huge decline in prices since June has been a major concern to all oil producers,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The Saudis have already started to cut output and now we’re getting evidence of further action. The market appears to have found a bottom and the statements are a sign for the buyers to return.”
Russian and OPEC analysts will meet in the spring, Russian Energy Ministry spokeswoman Olga Golant said by text message. “High-level” talks are scheduled for the second half of 2015, according to a joint statement from OPEC and Russia today.
“I wouldn’t be surprised if the Russians and OPEC cooperated to support the market,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.6 billion, said by phone. “It’s in the interests of both parties to keep prices from falling further.”
Workers at Nigerian National Petroleum Corp., the country’s state-owned oil company, began an indefinite strike that may disrupt crude output from Africa’s top producer, Babatunde Oke, a Lagos-based spokesman for both a managers’ union and a blue-collar workers’ union, said by phone today. The country produced 2.3 million barrels a day in August, the most since 2006, according to data compiled by Bloomberg.
U.S. aircraft bombed Islamic State fighters near Baghdad in the latest expansion of an air campaign that began last month, Central Command said in a statement. The strike follows President Barack Obama’s vow in a Sept. 10 speech to “degrade and ultimately destroy” the organization that has seized large swaths of northern Iraq and parts of neighboring Syria.
Crude futures surged when the militants captured the northern Iraqi city of Mosul.
Federal Reserve policy makers are meeting today and tomorrow. Fed Chair Janet Yellen is set to increase interest rates gradually between 2015 and 2017, according to a Bloomberg survey of economists. The Fed has been saying since March that interest rates would stay low for a “considerable time” after it completes the asset purchases known as quantitative easing.
An Energy Information Administration report tomorrow will probably show that U.S. crude inventories decreased 1.5 million barrels last week, according to the median of nine estimates in a Bloomberg survey.
Gasoline supplies fell 125,000 barrels during the week ended Sept. 12, according to the median estimate. Stockpiles of distillate fuel, a category that includes diesel and heating oil, probably increased 750,000 barrels.
October gasoline futures rose 2.8 cents, or 1.1 percent, to close at $2.5588 a gallon on the Nymex. Ultra low sulfur diesel for October delivery climbed 1.67 cents, or 0.6 percent, to $2.7563 a gallon.
Gasoline pump prices fell 0.9 cent to $3.381 a gallon nationwide yesterday, the least since Feb. 18, according to AAA, the largest U.S. motoring group.