Crude oil prices on Tuesday surged about four per cent after the United States inventory data showed a drop in stocks to nearly a two-decade low as crude imports into the US Gulf Coast slid last week due to Tropical Storm Hermine.
This is coming as the Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), Mr. Mohammed Barkindo, will today in Paris, France, meet the oil ministers of Saudi Arabia and Algeria as part of the renewed efforts to secure a global agreement to cut crude oil production to ensure the recovery of prices.
US crude stocks dropped 14.5 million barrels last week to 511.4 million barrels, the biggest weekly drop in stockpiles since January 1999, according to the US Energy Information Administration.
Brent crude oil neared $50 a barrel for the first time in two weeks.
It rose $1.84 to $49.82 a barrel, a 3.8 per cent gain, while the West Texas Intermediate crude was up $1.83, or 4 per cent, to $47.33 per barrel.
Tropical Storm Hermine, which threatened the Gulf Coast refining region last week, scuttled some US oil production and limited imports and shipping.
Gulf Coast crude imports hit the lowest levels on record last week, data showed, even though the storm ultimately did not harm Gulf facilities.
In a related development, Reuters reported that Algeria would host today’s informal meeting with Saudi Energy Minister, Khalid al-Falih and OPEC’s Barkindo.
A source at OPEC confirmed the meeting as part of a push for an output deal with producers battered by a glut-induced halving of oil prices over the past two years.
“There is a strong move towards a deal between OPEC and non-OPEC members to at least freeze production,” an OPEC source told Reuters.
“It seems we are going in this direction. But if we are going to freeze, we have to use secondary sources to gauge production levels. We can’t allow each country to use a different method,” the source said.
“Iran must agree to be in line with other producers and use secondary sources.”
Tehran has said that it supports any measures to stabilise the market. However, it has stopped short of indicating whether it would join a global deal before its production reaches 4 million barrels per day, the level it was pumping before the imposition of Western sanctions in 2012.
The sanctions ended in January this year.
Iran has been the main factor preventing an output deal between OPEC and non-OPEC Russia as Tehran has said it should be excluded from any such agreement before its production recovers.
The OPEC source said Iran’s production before sanctions had never exceeded 3.75 million bpd.
Iran has said it is producing slightly more than 3.8 million bpd. It signalled on Tuesday it was prepared to work with Saudi Arabia and Russia to prop up prices, although Tehran has begun to bargain with OPEC on possible exemptions from any output cap.
The OPEC source said major oil producers were trying to convince Tehran to come onboard, adding that there was an initial understanding that only Libya could be offered an exemption.
“Now there is a push to smooth things out and solve any problem,” the OPEC source said, adding there had been no agreement yet on any level at which to freeze production.
“This will be discussed in Algeria,” the source said.
Algeria is hosting meetings of the International Energy Forum and OPEC on September 26-28.
OPEC and Russia are expected to revive talks for a global deal on production in Algeria.
Gold Prices Rise as Soft Dollar Supports Safe-haven Appeal
Gold prices firmed on Monday, propped up by a subdued dollar and slight retreat in the U.S. Treasury yields, with investors gearing up for a week of speeches from U.S. Federal Reserve policymakers for cues on the central bank’s rate hike path.
Spot gold was up 0.5% at $1,759.06 per ounce, as of 0400 GMT, while U.S. gold futures were up 0.4% at $1,759.00.
While the dollar index softened, the benchmark 10-year Treasury yields eased after hitting their highest since early-July. A weaker dollar offered support to gold prices, making bullion cheaper for holders of other currencies.
“Gold is still looking slightly precarious where it is right now, and it’s probably bouncing off key technical level around $1,750,” IG Market analyst Kyle Rodda said.
“Gold remains an yield story and that yield story is very much tied back to the tapering story.”
A slew of Fed officials are due to speak this week including Chairman Jerome Powell, who will testify this week before Congress on the central bank’s policy response to the pandemic.
“There’ll be a lot of questions being put to Fed speakers about what the dot plots implied last week and weather there is higher risk of heightened inflation going forward and that rate hikes could be coming in the first half of 2022,” Rodda added.
A pair of Federal Reserve policymakers said on Friday they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy.
Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.
Investors also kept a close watch on developments in debt-laden property giant China Evergrande saga as the firm missed a payment on offshore bonds last week, with further payment due this week.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased 0.1% to 993.52 tonnes on Friday from 992.65 tonnes in the prior session.
Silver rose 0.9% to $22.61 per ounce.
Platinum climbed 1.3% to $994.91, while palladium gained 0.7% to $1,985.32.
Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints
Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.
Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.
“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.
Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.
Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.
China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.
India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.
Oil Holds Near Highest Since 2018 With Global Markets Tightening
Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.
Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
News2 weeks ago
Taliban Says Men and Women to Study Separately in Gender-Segregated Universities
Naira3 weeks ago
Naira Plunges Further, Exchanges at N530 to U.S Dollar
News2 weeks ago
Terrorism Sponsors: UAE Names Six Nigerians, 47 Others
Economy2 weeks ago
Senate Receives Buhari’s Request For $4.054B, €710M, $125M External Borrowing Approval
News4 weeks ago
Buhari Terminates Appointment of Power and Agriculture Ministers
Appointments4 weeks ago
CBN Appoints Six New Directors, Confirms Nwanisobi Spokesman
Company News4 weeks ago
FirstBank Sponsors Duke of Shomolu Production; As Awo and Aremu Hits The Stage
Cryptocurrency4 weeks ago
Top U.S. Regulator Is Right, Crypto Needs Regulation: deVere CEO