Oil rises as Saudi Arabia says producers will cooperate beyond 2018
Oil rises as Saudi Arabia says producers will cooperate beyond 2018
Strong global economic growth and a drop in US drilling activity also supported crude, traders said.
Brent crude futures were at $68.89 a barrel at 0315 GMT, up 25 cents, or 0.4 percent, from their last close. Brent on January 15 rose to $70.37, its highest since December 2014.
US West Texas Intermediate (WTI) crude futures were at $63.61 a barrel, up 24 cents, or 0.4 percent, from their last settlement. WTI climbed to $64.89 on January 16, also its highest since December 2014.
Saudi Arabia, the world’s top oil exporter and de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said on Sunday major oil producers were in agreement they should continue cooperating on production after their deal on supply cuts expires this year.
“There is a readiness to continue cooperation beyond 2018 ... The mechanism hasn’t been determined yet, but there is a consensus to continue,” Saudi Arabia’s Energy Minister Khalid Al-Falih said in Oman.
A group of oil producers including OPEC and Russia, the world’s biggest crude producer, started to withhold production in January last year to prop up prices. The deal is set to expire at the end of 2018.
In the US, declining drilling activity for new oil production further supported crude.
US drillers cut five oil rigs in the week to Jan. 19, bringing the count down to 747, energy services firm Baker Hughes said on Friday.
Despite this, the rig count in 2017 and early this year remains much higher than in 2016, resulting in a 16 percent rise in US production since mid-2016, to 9.75 million barrels per day.
Beyond supplies, strong global economic growth was also supporting oil prices.
“During the last four quarters, the underlying global growth dynamic began to shift... Global growth has become synchronized and accelerated above trend,” US bank Morgan Stanley said over the weekend in a note.
In the latest indicator, Japanese manufacturing sentiment in January jumped to an 11-year high, the Reuters Tankan poll showed on Monday, highlighting the optimism driven by nearly two years of economic expansion.
Despite the well-supported market, analysts warned oil markets had lost some steam since their peak early last week.
Bernstein Energy said on Monday that oil inventories might start rising soon due to a slowdown in demand which typically happens at the end of the northern hemisphere winter.
“We expect... an end to the strong (inventory) draws we have seen... With the strong correlation between inventories and crude prices, this perhaps means we should expect crude prices to moderate in the near term,” Bernstein said.
Asian stocks hit as Trump drops Kim summit but losses tempered
- Traders had already been nervous in recent days after the US president warned he could pull out of the June 12 meeting with the North Korean leader, while also voicing his displeasure at a deal to avert a trade war with China.
- In a letter released by the White House, Trump told Kim he was canceling the summit because of North Korea’s “anger” and “hostility.”
HONG KONG: Asian markets mostly fell on Friday as Donald Trump shocked the world by pulling out of next month’s historic summit with Kim Jong Un, though analysts said the losses were tempered by hopes the talks can be rekindled.
Traders had already been nervous in recent days after the US president warned he could pull out of the June 12 meeting with the North Korean leader, while also voicing his displeasure at a deal to avert a trade war with China and threaten tariffs on car imports.
The news Thursday took many by surprise — including North and South Korean officials — and fueled concerns about the future of a rapprochement that has had many hoping for peace on the divided peninsula.
In a letter released by the White House, Trump told Kim he was canceling the summit because of North Korea’s “anger” and “hostility.” The message came after a key aide to Kim hit out at comments from Vice President Mike Pence, saying they were “ignorant and stupid” and warning the talks could be canceled.
However, Trump’s letter added that the talks could still go ahead “at a later date.”
For its part, Pyongyang said the decision “unexpected” and “regrettable” but added: “We again state to the US our willingness to sit face-to-face at any time in any form to resolve the problem.”
“It looks like we are back to fire and fury as the modus operandi for the White House again after President Trump (threatened) a new 25 percent car import tariff and canceled the summit with North Korea,” said Greg McKenna, chief market strategist at AxiTrader.
“Not only was the summit canceled but it was back to threatening the DPRK with a military response.”Wall Street ended lower, while Asian trading was muted. Tokyo ended the morning slightly higher, while Hong Kong slipped 0.3 percent and Shanghai was barely moved. Sydney and Singapore each fell 0.1 percent while Seoul was 0.2 percent lower.
Manila and Kuala Lumpur also fell but Wellington, Taipei and Jakarta were in positive territory.
While warning the issue remained fragile, analysts said there was still hope the meeting will go ahead.
“As we’ve seen countless times before, the president tends to walk back some of his more boisterous rhetoric time and time again,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
“While the US and their allies have offered a way to prosperity for North Korea, it was never going to come without some significant concession on the nuclear non-proliferation front.”
And Eli Lee, Bank of Singapore’s head of investment strategy, added: “Given the US’ surprising acceptance of the meeting only in March, the cancelation... may simply be due to the fact that both sides need simply more time for preparation and to find a middle ground in terms of their demands.”
On oil markets, both main contracts extended Thursday’s more than one percent losses after Russia said an agreement with OPEC to cap production — which has provided support to prices in recent years — could be up for revision at a meeting next month .
The comments from Energy Minister Alexander Novak dented a rally in the commodity, which has hit three-and-a-half-year highs on the back of improving demand and supply worries from Venezuela and Iran.
Tokyo — Nikkei 225: UP 0.1 percent at 22,457.20 (break)
Hong Kong — Hang Seng: DOWN 0.3 percent at 30,666.38
Shanghai — Composite: FLAT at 3,154.04
Euro/dollar: DOWN at $1.1705 from $1.1725 at 2100 GMT
Pound/dollar: DOWN at $1.3364 from $1.3385
Dollar/yen: UP at 109.53 from 109.30 yen
Oil — West Texas Intermediate: DOWN nine cents at $70.62
Oil — Brent North Sea: DOWN 12 cents at $78.67
New York — Dow: DOWN 0.3 percent at 24,811.76 (close)
London — FTSE 100: DOWN 0.9 percent at 7,716.74 (close)