Brent Gains First Time in 4 Days as Investors Weigh OPEC

Brent and West Texas Intermediate crude gained for the first time in four days as investors weighed the potential outcome of next week’s OPEC meeting.

Leading members of the Organization of Petroleum Exporting Countries are resisting calls to reduce output while others including Venezuela seek action to support prices at a Nov. 27 meeting in Vienna. An OPEC production cut looks increasingly likely, Morgan Stanley said in a report yesterday. Brent trading volatility rose to the highest in more than two years.

“The market is eyeing next week’s OPEC meeting for some kind of movement,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “OPEC needs to take action and make the cuts. The market is still under pressure but we are close to the bottom.”

Brent for January settlement gained $1.23, or 1.6 percent, to end at $79.33 a barrel on the London-based ICE Futures Europe exchange. Total volume of all futures was 21 percent below the 100-day average. Front-month prices have decreased 28 percent this year.

Implied volatility for at-the-money front-month Brent options, a measure of expected futures movements and a key gauge of options value, rose to 32.23 percent yesterday, the highest level since July 2012, according to data compiled by Bloomberg. Volatility was 31.23 percent today.

WTI for January delivery, the most-actively traded, rose $1.35, or 1.8 percent, to $75.85 a barrel on the New York Mercantile Exchange. The December contract, which expired today, climbed $1 to $75.58. The European benchmark crude traded at a premium of $3.48 to WTI for the same month on ICE, compared with $3.60 yesterday.

Bear Market

Oil collapsed into a bear market as OPEC production rose and the U.S. pumps at the fastest rate in more than three decades. OPEC pumped 30.97 million barrels a day in October, exceeding its collective output target of 30 million barrels a day for a fifth straight month, data compiled by Bloomberg show.

The 12-member group should cut output by 500,000 barrels a day, Libya’s OPEC governor Samir Kamal said yesterday.

“OPEC needs to get everybody on board,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “It’s going to be a battle. I don’t see who is going to cut. The market is just going to bounce around before the meeting.”

Iran Talks

U.S. Secretary of State John Kerry will today join envoys from six world powers and Iranian counterparts for intensive talks on the country’s nuclear program. Iran won’t cut its oil output by a single barrel, said the country’s Oil Minister Bijan Namdar Zanganeh.

“Under no circumstance will Iran decrease its share of the global market, not even by one barrel,” Zanganeh said in TV interview, according to ministry’s news website Shana.

Zanganeh said he will discuss oil market share with Saudi Arabia, OPEC’s largest producer, in Vienna on Nov. 26, the day before the group’s meeting, according to a report from the official Islamic Republic News Agency, citing the same TV interview.

Crude also gained on speculation stronger economic growth in the U.S. will increase demand. Existing homes sold at a 5.26 million annual pace in October, the strongest since September 2013 and up 1.5 percent from a revised 5.18 million pace in September, the National Association of Realtors reported today.

The Conference Board’s index of U.S. leading indicators, a gauge of the outlook for the next three to six months, climbed 0.9 percent last month, the most since July, after rising 0.7 percent in September, the New York-based group said today.

Refinery Runs

“The economy looks good, and when the economy is good, demand rises,” said Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan. “Strong refinery runs are going to keep oil supported.”

Demand for gasoline climbed to 9.19 million barrels a day last week, the most since Aug. 29, the Energy Information Administration reported yesterday.

Regular gasoline prices averaged $2.85 a gallon nationwide yesterday, the lowest since November 2010, according to AAA.

U.S. refineries operated at 91.2 percent of capacity last week, the most since Sept. 19, the EIA said.

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