Oil Falls for First Day in 5 as OPEC Euphoria Fades; Bonds Gain

• Oil Falls for First Day in 5 as OPEC Euphoria Fades; Bonds Gain

Oil slipped from a 16-month high as doubts emerged about how OPEC will implement the first supply curbs in eight years. European bonds gained with stocks.

Crude fell for the first time since the group of oil producers confounded skeptics on Wednesday by agreeing to cut production, a pact that may be challenged by rising output from non-member countries. Bonds rose across the euro-area before a European Central Bank policy meeting this week that may end with the institution’s bond-buying program being extended beyond March. Utilities led European stocks higher as Germany’s top court ruled that RWE AG and EON SE are entitled to compensation for power-production rights they lost because of the government’s decision to exit from nuclear energy.

Questions about how successful OPEC will be in its attempt to bolster prices pared a gain that has kept prices above $51 a barrel since the accord was reached. Crude production from the Organization of Petroleum Exporting Countries rose to a record 34.16 million barrels a day in November, with Nigeria and Libya adding a combined 140,000, according to a Bloomberg survey. Both countries are exempt from making supply cuts because their output has been reduced by conflict or attacks on oil infrastructure, meaning other OPEC members would have to cut deeper to hit the group’s 32.5 million barrel-a-day target.

“It’s a headache for OPEC in terms of increase in production for Libya and Nigeria, definitely that’s a tricky part,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets. “A lot of buying went on following the OPEC decision and now it’s sort of taking it quietly.”

Commodities

• West Texas Intermediate crude fell 1.3 percent to $51.14 a barrel as of 7:42 a.m. in New York while Brent dropped 0.9 percent to $54.46, ending a four-day winning streak that was the longest since August.
• Aluminum fell 1.2 percent to $1,713.50 a metric ton, the biggest drop in a week. The metal will probably tumble next month as an “irrational” increase in prices prompts companies to restart plants, while new capacity also ramps up in the world’s largest supplier, according to China’s top metals industry group. Copper lost 1.4 percent and zinc slid 0.8 percent.

Stocks

• The Stoxx Europe 600 Index gained 0.4 percent, adding to its 0.6 percent advance from Monday, as investors looked past the political turmoil sparked by the defeat of Italian Prime Minister Matteo Renzi in a constitutional referendum, instead focusing on the improving outlook for the global economy.
• RWE shares advanced 2.9 percent and EON was 5.3 percent higher.
• Italy’s FTSE MIB Index recouped 0.9 percent, helped by gains of at least 1.3 percent by UniCredit SpA and Mediobanca SpA.
• Stoxx 600 energy producers tracked declines in oil prices, which retreated from the highest close in 16 months.
• The MSCI Emerging Markets Index jumped 0.8 percent.
• S&P 500 Index futures were little changed before Tuesday’s release of factory and durable goods orders, which may confirm the U.S. economy is gaining strength and giving the Federal Reserve more reason to raise interest rates. The Dow Average swung back to gains Monday, increasing 0.2 percent to an all-time high.

Currencies

• The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after falling 0.4 percent Monday.
• The euro fell 0.2 percent to $1.0749 after ending Monday up 0.9 percent, erasing an earlier slide of as much as 1.5 percent in the wake of the Italian vote.
• The pound reached a two-month high as the U.K.’s top court heard a second day of arguments in a court case over who has the right to trigger Britain’s exit from the European Union, climbing as much as 0.3 percent to $1.2775.
• The Australian dollar fell 0.3 percent to 74.52 U.S. cents, after the nation’s central bank kept interest rates unchanged and Governor Philip Lowe said “some slowing in the year-ended growth rate is likely.”

Bonds

• Italy’s 10-year bond yield declined four basis points to 1.94 percent, after Monday’s increase of eight basis points.
• Yields on Portugal’s bonds with a similar due date decreased eight basis points to 3.58 percent, while Germany’s rose two basis points to 0.35 percent.
• Almost all economists surveyed by Bloomberg expect the ECB to announce on Thursday that its bond-buying program will be extended after March, and most foresee an extension of about six months at the current 80 billion euros ($85 billion) a month.
• Treasury 10-year yields were little changed at 2.39 percent.