Oil rises above $50 as supply glut shows signs of wearing down
Oil jumped following signals that the world's biggest crude exporters may extend or deepen supply cuts.
Futures advanced as much as 3 percent in New York, the biggest gain in two weeks. OPEC Secretary-General Mohammad Barkindo said more nations may join the production accord the group hammered out with Russia and other exporters in late 2016, while the Saudis plan to restrict their own sales by a record amount within weeks. The falling value of the U.S. dollar also spurred some investors to buy because crude is priced in the currency.
"There is a sense that we're going to get a deal done," Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. Saudi Arabia's announcement that it'll sell fewer barrels than ordered next month "is a sign that they are going to continue to be serious. If you are going to cut to your customers in November, it's probably a clear sign that you expect these production cuts are going to continue."
Oil has struggled to hold above $50 a barrel as rising output from U.S. shale explorers diminished the impact of supply curbs implemented by the Organization of Petroleum Exporting Countries and allies such as Russia. Macquarie Bank said OPEC probably will extend output cuts through at least the third quarter of next year and perhaps to the end of 2018.
"We have OPEC and Russia signaling that they are at least contemplating the possibility of taking robust action to lift the market. That's going to convince people to be comfortable going long here," Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. "The market is getting convinced that there are growing signs that this oversupply is eroding."
West Texas Intermediate for November delivery added $1.40 to $50.98 a barrel at 1:03 p.m. on the New York Mercantile Exchange. Total volume traded was about 16 percent below the 100-day average. Prices climbed 29 cents to $49.58 on Monday.
Brent for December settlement advanced 98 cents to $56.77 on the London-based ICE Futures Europe exchange, and traded at a $5.47 premium to WTI for the same month.
The Bloomberg Dollar Spot Index, a gauge of the dollar against 10 major peers, fell as much as 0.5 percent.
A Bloomberg survey showed that both U.S. crude supplies and distillate stockpiles probably shrank by 2 million barrels each last week. At the Cushing, Oklahoma, pipeline hub, crude inventories likely increased by 1.8 million barrels, according to a separate forecast compiled by Bloomberg.
The industry-funded American Petroleum Institute will release its inventory data on Wednesday, a day later than usual, due to the U.S. Columbus Day Holiday.