Oil Rises From 3-Week Low on Report Gulf Nations May Cut Outputby
Saudis, Gulf OPEC allies may cut output 4% from peak: Reuters
OPEC head Barkindo urges members to show ‘maximum flexibility’
Oil climbed from a three-week low following a report that Gulf nations may be willing to cut output as OPEC weighs action to ease a supply glut.
Prices rose 1.1 percent in New York. Reuters reported Saudi Arabia and its Gulf OPEC allies are willing to cut 4 percent from their peak oil output, citing sources familiar with the matter. OPEC Secretary-General Mohammed Barkindo urged members to show “maximum flexibility” to agree on output cuts, after saying Tuesday the group is facing its “hardest” challenge.
“There is a report that the Saudis and their Gulf compatriots are willing to cut output by 4 percent,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “Whether that’s enough or not, we’ll see. There’s increasing amounts of skepticism in this market, which is keeping prices near these multi-week lows.”
Oil has fluctuated near $50 a barrel amid uncertainty about whether the Organization of Petroleum Exporting Countries can implement its first output cuts in eight years at an official gathering in November. An OPEC committee will meet this week to try to resolve differences over how much individual members should pump, after Iraq joined the list of countries seeking an exemption from caps.
West Texas Intermediate for December delivery advanced 54 cents to settle at $49.72 a barrel on the New York Mercantile Exchange. On Wednesday, the contract closed at $49.18, the lowest since Oct. 4.
Brent for December settlement increased 49 cents, or about 1 percent, to settle at $50.47 a barrel on the London-based ICE Futures Europe exchange, trading at a 75-cent premium to WTI.
“The market continues to search for direction in the $45 to low-$50 range,” Michael D. Cohen, the head of energy commodities research at Barclays Capital in New York, said by telephone. “As we get closer and closer to the OPEC meeting, producers are going to try to both manage market expectations in the case of a failure and also try to stake out their positions.”
Iraq’s Oil Minister Jabbar Al-Luaibi said previously that the country shouldn’t have to cut production because it’s embroiled in a war with Islamic militants. Nigeria, Iran and Libya are exempt from the proposed output cuts. Speaking from Iraq, OPEC’s Barkindo said he would work with members to overcome the “challenges and uncertainties” of the market and urged them to be accommodating to achieve an agreement. Meanwhile, Algeria’s Energy Minister Noureddine Boutarfa said there’s “no turning back” on the Algiers deal and that the group’s Nov. 30 summit will fix quotas.
“The market is increasingly convinced that there won’t be meaningful production cuts from OPEC and Russia even if an agreement is made, but the gradual path towards tighter supply-demand balances and psychological impact of OPEC cooperation is limiting downside risk,” said Clayton Rogers, an energy derivative broker at SCS Commodities Corp. in New Jersey.
- A Wednesday EIA report showed that U.S. Gulf Coast and East Coast crude stockpiles increased last week, while West Coast inventories declined, pushing down the nationwide total. The West Coast’s distribution system is isolated from the rest of the country and changes in stockpiles in that area are often dismissed by the market.
- Oil is likely to reach $30 a barrel before $60, ING Bank NV’s Head of Commodity Strategy Hamza Khan said in a Bloomberg Television interview.
- Nigeria’s oil output will rise to 2 million barrels a day from the current 1.8 million after the return of exports from the nation’s Forcados terminal, according to Minister of State for Petroleum Resources Emmanuel Kachikwu