Brent Rises to Two-Week High on OPEC Comments; WTI Gains

Brent crude rose to a two-week high after OPEC’s Secretary-General said the recent plunge in prices doesn’t reflect the balance between supply and demand. West Texas Intermediate gained before government inventory data.

Both grades are rebounding after falling more than 20 percent from this year’s high in June. Shale oil drillers will be hurt by the fall in crude prices before members of OPEC because their costs are higher, OPEC’s Abdalla El-Badri said in London today. WTI gained on expectations that U.S. stockpiles of gasoline and diesel fell last week.

“OPEC is trying to talk the market up a little bit,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “A draw in refinery product stocks is going to be bullish. There is some short-covering going on.”

Brent for December settlement gained 99 cents, or 1.2 percent, to $87.02 a barrel at 9:25 a.m. New York time on the London-based ICE Futures Europe exchange. The contract reached an intraday high of $87.74, the most since Oct. 14. The volume of all futures was 13 percent below the 100-day average.

WTI for December delivery rose 72 cents, or 0.9 percent, to $82.14 a barrel on the New York Mercantile Exchange. Volume was 8 percent below the 100-day average. Brent traded at a premium of $4.88 to WTI on the ICE.

Current Prices

As much as 50 percent of tight oil output will be “out of the market” at current prices, while the Organization of Petroleum Exporting Countries is not in a critical situation, El-Badri said.

Crude collapsed into a bear market this month as Saudi Arabia and other producers deepened price discounts for their oil. Global supplies are rising as the U.S. pumps the most oil in almost three decades and Russia’s output nears a post-Soviet record.

“We see that demand is still growing, that supply is also growing, but the magnitude in the increase in supply does not really reflect this 25 percent change in the market,” El-Badri said. “Unfortunately everybody is panicking.”

OPEC is currently producing about 30 million barrels a day, according to El-Badri. The group, which next meets Nov. 27 in Vienna, will need to pump 29 million to 30 million barrels a day next year to meet demand, he said.

U.S. gasoline inventories may have dropped 900,000 barrels last week, a Bloomberg survey showed before an Energy Information Administration report today. Inventories of distillate fuel, including heating oil and diesel, dropped 1.4 million and stockpiles of crude oil grew 3.65 million, according to the survey.

Before it's here, it's on the Bloomberg Terminal.