Oil nears $49 as brighter demand outlook sparks optimism

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By Jessica Summers

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NEW YORK (Bloomberg) — Oil climbed the most in a week as the International Energy Agency and OPEC improved their outlook for demand.

Futures gained as much as 1.8% in New York. The IEA sees global oil demand rising this year by the most since 2015, while OPEC boosted projections for consumption in Europe and China. Plus, the cartel and its allies are said to be considering an extension of their output-cut deal beyond March. Meanwhile, U.S. gasoline inventories tumbled the most on record last week as refineries in Texas are still recovering from Hurricane Harvey.

The IEA’s stronger demand estimates have helped lift oil prices, Matthew Beck, managing director of a $8-billion oil and natural gas bond and private-equity portfolio at John Hancock Financial Services Inc. in Boston, said by telephone. At the same time, “there has been a fair bit of OPEC rhetoric in the market the last few days of potentially extending cuts and focusing on reducing exports, which would all be positive.”

Oil in New York has closed below $50/bbl since July as efforts to drain a global glut by the Organization of Petroleum Exporting Countries and partners including Russia confront rising shale output. One option that OPEC and its allies are considering is a six-month extension to supply curbs from the end of March, according to a person familiar with the matter.

West Texas Intermediate for October delivery rose 72 cents to $48.95/bbl at 12:14 p.m. on the New York Mercantile Exchange. Total volume traded was about 13% above the 100-day average. Prices climbed 16 cents to $48.23 on Tuesday.

The S&P 500 Energy Index climbed as much as 1.2%, with Chesapeake Energy Corp. jumping 8%, while Pioneer Natural Resources Co. and Devon Energy Corp. gained more than 3.5%.

Brent for November settlement increased 58 cents to $54.85 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.46 to November WTI.

Brent’s large premium over the U.S. benchmark “is the most telling signal that U.S. crude oil markets need more time to return to normal in the wake of Hurricane Harvey,” IHS Markit said in a note Wednesday.

Choppy data

OPEC members are discussing prolonging the cuts ahead of a ministerial meeting scheduled for late November in Vienna, with a three-month extension seen as the minimum, the people said. The duration will depend on multiple variables, including the level of compliance, the pace of the output recovery in Libya and Nigeria, U.S. shale supply and the strength of global demand.

In the midst of unstable refinery operations due to Harvey, nationwide gasoline stockpiles slid by 8.43 million to 218.3 MMbbl last week, the lowest level since December 2015, a report Wednesday from the Energy Information Administration showed. At the same time, crude inventories climbed by 5.89 MMbbl to 468.2 million, while refinery utilization sunk. Cushing, Oklahoma supplies rose by the most since March, while oil production climbed by the most since 2012.

“Storage data is going to continue to be choppy, as it was this week, for the next few weeks,” Beck said. “We expect crude prices to be stuck in somewhat of a holding pattern until we have Gulf Coast refineries brought back to full capacity.”

Naija247news
Naija247newshttps://www.naija247news.com/
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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