Oil Rides Biggest 2-Day Gain Since June

Oil Rides Biggest 2-Day Gain Since June
Oil headed for its biggest 2-day advance since June as concerns over a supply glut eased.

(Bloomberg) -- Oil headed for its biggest two-day advance since June as concerns over a supply glut eased on hopes that OPEC and its allies will strike a deal to stabilize the market.

Futures in New York rose as much as 1.5 percent, extending Monday’s 4 percent gain. An agreement between Saudi Arabian Crown Prince Mohammed bin Salman and Russian President Vladimir Putin over the weekend raised the possibility of an output accord when OPEC and its partners meet in Vienna on Dec. 6. Prices also received a boost after Canada’s Alberta province announced plans to cut production by 325,000 barrels a day.

Crude is rebounding from the worst monthly drop in a decade on growing optimism the world’s top oil exporters will tackle the risk of a glut. Still, Moscow and Riyadh have yet to agree on details, including the size of potential output cuts. A U.S.-China trade truce also sparked bullish sentiment across global markets, pulling the American benchmark out of “oversold territory” for the first time in almost a month.

“Even if Russia shows a willingness to refrain from ramping up production, that’s a positive sign for Saudi Arabia and the rest of OPEC,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone. “Oil’s also getting a boost from the easing trade tensions between America and China, as well as Canada’s output cuts which will lift Western Canadian Select’s discount to the U.S. marker.”

West Texas Intermediate for January delivery rose as much as 77 cents to $53.72 a barrel on the New York Mercantile Exchange, and was at $53.51 at 7:47 a.m. in London. Futures jumped $2.02 to close at $52.95 on Monday. Total volume traded Tuesday was about 28 percent above the 100-day average.

Brent for February settlement gained 68 cents to $62.37 a barrel, after closing at $61.69 on London’s ICE Futures Europe exchange on Monday. Technical indicators are showing a bearish cloud is still hanging over prices, with the 50-day moving average having fallen below the 200-day average, arriving at what’s known as the death cross. The global benchmark crude was at an $8.62 premium to WTI for the same month.

While the Joint Technical Committee, which met on Monday, is said to have made no recommendations for the Vienna meeting on supplies, another OPEC advisory body said last week a production cut of 1.3 million barrels a day is needed to balance the market in 2019. On Sunday, group President and the United Arab Emirates Energy Minister Suhail Al Mazrouei said he was optimistic the Organization of Petroleum Exporting Countries and its allies will reach an accord.

Alberta’s plan to mandate OPEC-style output curbs further eased fears of a glut. The unprecedented step to ease a crisis in the Canadian energy industry will reduce production of raw crude and bitumen by 8.7 percent starting in January until the levels of excess oil in storage are drawn down. The cut would then drop to 95,000 barrels a day until the end of next year at the latest.

Western Canadian Select’s discount to U.S. benchmark WTI narrowed $6 to $23 a barrel on Monday, data compiled by Bloomberg show. The discount sank to as much as $19.75 a barrel earlier in the day, the tightest since July. On an outright basis, prices were up more than $8 a barrel.

To contact the reporter on this story: Heesu Lee in Seoul at hlee425@bloomberg.net To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Sungwoo Park


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Warren Millne  |  December 04, 2018
It is amazing that so many have no insight to the future. If we continue to flood the market with our oil, we will see gas lines again as before in the early 70's. The attitude that there is an infinite amount of oil in the earths crust is beyond me. If we did not have the new technology in drilling to be able to drill the equivalent of 40 wells in one well, we would be importing oil at over $100/bbl. We the people are enjoying the high wages paid in the oil and gas industry and the lower cost of energy. This at the expense of future generations. They, our children, or future generations will pay the price when we have less than sufficient oil to produce. The practice of burning the gas to produce the high price of oil is wasting energy. Natural gas is cheap now, but when it is the last source of energy it will also go up considerably. The oil producing states need to get together and do as has been done in the past and institute production limits to allow the companies to regain their investment and then slowly produce the oil and either return the gas to the formation to maintain pressure.