TAKE MEASURES: OIL UP
West Texas Intermediate and Brent crudes increased after China, the world's second-largest oil-consuming country, cut interest rates to bolster its economy.
WTI rose 0.9 percent and Brent 1.3 percent after the People's Bank of China lowered lending and deposit rates for the first time since 2012. Half of the 20 analysts surveyed by Bloomberg News predict the Organization of Petroleum Exporting Countries will reduce output at a meeting next week, while the rest forecast no change.
"The Chinese announcement ambushed everyone and we're seeing all the markets react," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. "The interest rate cut is leading to the perception that fuel demand will gain."
WTI for January delivery advanced 66 cents to settle at $76.51 a barrel on the New York Mercantile Exchange. Prices rose 0.9 percent this week, the first weekly gain since September. Futures touched $73.25 Nov. 14, the lowest intraday level since Sept. 21, 2010. The volume of all futures traded was 19 percent below the 100-day average at 2:50 p.m.
Brent for January settlement increased $1.03 to end the session at $80.36 a barrel on the London-based ICE Futures Europe exchange. Volume was 0.4 percent higher than the 100-day average. The contract climbed 1.2 percent this week. The European benchmark crude closed at a $3.85 premium to WTI.
The People's Bank of China cut its one-year benchmark lending rate by 0.4 percentage point to 5.6 percent, while the deposit rate fell 0.25 percentage point to 2.75 percent, effective from tomorrow.
Prices also rose after Mario Draghi strengthened his stimulus pledge for the euro area by saying the European Central Bank can't hold back in its fight to revive the economy.
"We will do what we must to raise inflation and inflation expectations as fast as possible, as our price-stability mandate requires," the ECB president said at a conference in Frankfurt today. Some inflation expectations "have been declining to levels that I would deem excessively low," he said.
"The Chinese rate cut and Draghi's comments sent prices higher this morning," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. "The stimulus will spur greater demand for oil going into 2015."
Oil collapsed into a bear market last month as U.S. drillers pumped at the fastest pace in more than three decades, OPEC output climbed and global demand growth slowed. OPEC must decide whether to hold output and allow prices to keep falling to deter rival output growth, or to make a cut and boost prices.
"The Chinese announcement is supportive but not a game changer and we're still going to have a surplus next year," Evans said. "We're still looking at OPEC to do something to balance the market next week. That will be our focus until the meeting."
Saudi Arabia, OPEC's biggest producer, may be shifting its focus to defend market share, according to Bank of America Corp. The kingdom may prefer lower and more volatile oil prices to discourage investment in North American shale output, it said in a note yesterday, projecting that OPEC may trim its collective target by no more than 500,000 barrels a day.
OPEC, which supplies about 40 percent of the world's oil, pumped 30.97 million barrels a day in October, data compiled by Bloomberg show. That exceeded its quota of 30 million a day for a fifth straight month.
Saudi Arabia and Russia agreed that the oil market "must be free of attempts to influence it for political and geopolitical reasons," Russian Foreign Minister Sergei Lavrov told reporters in Moscow today after a meeting with his Saudi counterpart. Oil exporters "have a right to take measures to correct these non-objective factors."
Gasoline futures rose 2.89 cents, or 1.4 percent, to settle at $2.0565 a gallon in New York. Ultra low sulfur diesel increased 2.45 cents, or 1 percent, to settle at $2.4045.
Regular gasoline at U.S. pumps fell to the lowest level since November 2010. The average retail price slipped 1.1 cents to $2.839 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation's biggest motoring group.
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BLOOMBERG - Treasury Secretary Steven Mnuchin told a Texas judge that Exxon Mobil Corp. doesn’t have a right to see privileged documents related to a $2 million fine assessed against the energy company for violating sanctions related to Russia’s 2014 invasion of Ukraine.
NPD - Preliminary production figures for June 2018 show an average daily production of 1 747 000 barrels of oil, NGL and condensate, which is an increase of 88 000 barrels per day compared to May.
NOVATEK - In the first half 2018, NOVATEK’s hydrocarbons production totaled 264.3 million barrels of oil equivalent (boe), including 32.93 billion cubic meters (bcm) of natural gas and 5,864 thousand tons of liquids (gas condensate and crude oil), resulting in an increase in total hydrocarbons production by 6.3 million boe, or by 2.4%, as compared to the first half 2017.
REUTERS - Brent crude futures LCOc1 were down 75 cents, or 1 percent, at $78.11 a barrel by 0308 GMT, having fallen as low as $77.60. U.S. crude CLc1 was down 55 cents, or 0.7 percent, at $73.56.