Oil Trades Above $51 as Heightened Risk Appetite Props Up Prices
(Bloomberg) -- Oil rebounded as a risk-on appetite is seen coming back into financial markets.
West Texas Intermediate futures closed 0.4 percent higher in New York as U.S. equities rallied. In the U.S., oil rigs slid for a third week, according to Baker Hughes data. Meanwhile, supply from Kurdistan remains uncertain. WTI’s 50-day moving average rose above the 200-day one, a bullish signal know as a golden cross.
“The stock market is hitting new highs. The risk-on appetite is coming back,” Michael Loewen, a commodities strategist at Scotiabank in Toronto, said by telephone. “The general rhetoric has been OPEC is going to be extending their cuts. We’ve been seeing good demand in the U.S. At the end of the day, the market is shaping up a lot more firmly than most were anticipating.”
The U.S. oil rig count fell by seven to 736 rigs this week, as Schlumberger Ltd. and Baker Hughes, the world’s two biggest oilfield service companies, say North America’s growth engine is slowing. OPEC is seen willing to extend its deal to reduce output, with the Russian President Vladimir Putin saying if OPEC and allies did agree to an extension, it should run through at least the end of next year.
West Texas Intermediate crude for November delivery, which expires Friday, rose 18 cents to settle at $51.47 a barrel on the New York Mercantile Exchange. Total volume was about 23 percent below the 100-day average. The more-actively traded December contract added 33 cents to end the session at $51.84.
Brent for December settlement climbed 52 cents to settle at $57.75 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.91 to December WTI.
“Most investors are more comfortable about getting short in the mid-to-higher $50s now as opposed to the lower $50s,” Loewen said. “We’re kind of stuck in this neutral territory where it doesn’t quite make sense to get short yet.”
Geopolitical tensions in Iraq have helped to support oil prices this week. Goldman Sachs Group Inc. said the potential impact of tensions in the Middle East is uncertain. The flow rate through the pipeline connecting Kurdistan to the Turkish port of Ceyhan remained below normal rates, at about 200,000 barrels a day, according to a port agent. Iraqi forces regained control on Zummar town where Batma and Ain Zala fields are located, the Iraq military said in a statement.
“There was some hope the pipe would be fully allocated this weekend,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said. “Events have thrown some doubts into that assumption.”
Other oil-market news:
Mexico’s September oil production fell to its lowest monthly output since at least 1980, according to an emailed statement by the Mexico Oil Regulator referred to as CNH. In the options market, investors may be losing faith in a sustained rally, paying the most since June for puts, which offer protection against a drop in prices, versus calls, which gain value as prices rise.
With assistance from Aaron Clark, Grant Smith, Nico Grant, Sharon Cho and Meenal Vamburkar. To contact the reporter on this story: Jessica Summers in New York at email@example.com. To contact the editors responsible for this story: James Herron at firstname.lastname@example.org Jim Efstathiou Jr., Will Wade.
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