Crude prices rally 4% as Russia, Saudis signal output curbs

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Monday, December 3,2018

Qatar says it will exit OPEC as of Jan. 1, 2019

Crude prices soared on Monday as optimism ahead of an OPEC meeting grew after Russian President Vladimir Putin said he and Saudi Crown Prince Mohammed Bin Salman agreed to extend output cuts on the sidelines of the weekend G-20 meeting.

Also boosting crude, Canada’s oil-rich Alberta province announced surprise output curbs. Meanwhile news that U.S. and China agreed steps to thawing of trade tensions was lifting perceived riskier assets across the board.

West Texas Intermediate crude for January delivery CLF9, +5.03%  on the New York Mercantile Exchange surged $2.26, or 4.4%, to $53.20 a barrel. The contract rose about last 1% last week, but for the month of November tumbled 22%, the biggest monthly fall since October 2008, amid concerns about a global crude glut.

Global benchmark February Brent crude LCOG9, +5.44%  jumped $2.30, or 3.9%, to $61.75 a barrel. January Brent, which expired on Friday, also marked a 22% drop for November, and the biggest monthly percentage drop in 10 years.

Russia’s Putin made the announcement in a press conference late Saturday, after a meeting with Bin Salman, though he said there was no final decision on volumes. The comments come ahead of the Thursday-Friday OPEC meeting in Vienna, which will decide whether output cuts are needed. Oil prices have dropped by a third since early October.

In a surprise move, Qatar said Monday that it will pull out of OPEC by Jan. 1, 2019, as it focuses on boosting natural-gas production. January natural gas NGF19, -6.46%  fell 2.4% to $4.499 per million British thermal units. The contract climbed 41% in November—the largest monthly rise in nine years.

Another big boost for crude came after Sunday’s unprecedented announcement by Alberta Premier Rachel Notley, who said she has ordered oil companies in the Canadian province to cut production by nearly 9% next year. Canada is the fourth-largest oil producer in the world.

“This is due to the local oversupply that has pushed the price of Canadian oil (Western Canada Select) to below $20 per barrel at times. Perhaps OPEC should therefore consider inviting Canada to its meeting on Friday,” said analysts at Commerzbank, in a note to clients on Monday.

A bilateral agreement between the U.S. and China to launch trade negotiations triggered a rally across a broad swath of assets on Monday, with Dow industrials futures YMZ8, +1.77%  up over 500 points, and the German DAX 30 index DAX, +2.05%  up 2.5% for its best one-day gain so far since April.

The U.S. postponed plans to lift tariffs on $200 billion in Chinese goods and China agreeing to buy more U.S. goods. If those talks fail the U.S. will go ahead with increasing the tariffs to 25% from the current 10%.

Meanwhile, Baker Hughes BHGE, -1.25%  on Friday reported that the number of active domestic rigs drilling for oil rose by 2 to 887. Separately, the Energy Information Administration said oil U.S. field production of oil fell to 344 million barrels in September from nearly 352 million in August.

In other energy trading, January gasoline RBF9, +4.77% jumped 4.6% to $1.467 a gallon, while January heating oil HOF9, +3.80% rose 3% to $1.886 a gallon. The December contracts for both products, which expired at Friday’s settlement, saw monthly losses of around 18%.

January natural gas NGF19, -6.46%  fell 2.4% to $4.499 per million British thermal units. The contract climbed 41% in November—the largest monthly rise in nine years.

 

 

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