Oil rallies as OPEC sees potential for non-OPEC supply cuts
NEW YORK (Bloomberg) - Oil advanced for the first time in three days after a report that OPEC sees a potential reduction in supply from outside of the group.
Futures rose as much as 1% in New York Wednesday. OPEC sees potential for a “sharp” cut in projected production from countries outside the group next year, according to Secretary-General Mohammad Barkindo. The group also sees a possible “upswing” in the demand-growth forecast, particularly if the U.S. and China sign a preliminary trade agreement
When the OPEC headlines hit the market, prices “started to rally from the red to the green,” said Bob Yawger, future divisions director for Mizuho Securities in New York. “Until this turnaround things were getting ugly.”
While crude prices have picked up over the past month, they’re still down about 14% from the peak reached in April as the prolonged U.S.-China trade dispute saps an already-fragile global economy, crimping fuel demand. OPEC, which cut production this year to prop up the market, has signaled it’s unlikely to take stronger action to prevent a renewed glut in 2020.
Meanwhile, Federal Reserve Chairman Jerome Powell said the current stance of monetary policy is likely to be sufficient provided the economy stays on track, but warned that “noteworthy risks” remain to the record U.S. expansion.
“The market is digesting chairman Powell’s speech,” said John Kilduff, partner at Again Capital in New York. “This is a bit of positive pull up from Powell, it’s the fact that the Fed is going to be on hold because the economic outlook is looking brighter and is a key aspect to the energy market these days because of the focus on the demand.”
West Texas Intermediate for December delivery rose $0.55 to $57.35 a barrel on the New York Mercantile Exchange as of 10:10 a.m. local time.
Brent for January rose $0.37 to $62.43/bbl on the London-based ICE Futures Europe Exchange, and traded at a $5.10 premium to WTI for the same month.
American crude inventories are forecast to have risen by 1.5 MMbbl last week, according to a Bloomberg survey, adding to concerns over a looming supply glut. That would be the eighth increase in nine weeks if confirmed by official Energy Information Administration data due on Thursday. Stockpiles were at 446.8 MMbbl as of Nov. 1, the highest since mid-July.
