Oil leaps on Saudi price talk
london — Oil prices kept rising to their highest since late 2014 as US crude inventories declined, moving closer to five-year averages, and after sources told that top exporter Saudi Arabia aims to push prices even higher.
Brent crude futures reached $74.74 a barrel, the highest since November 27, 2014 — the day the Opec decided to pump as much as it could to defend market share, sending the price to a low of $27 just over a year later.
Brent futures came off slightly to $74.40 a barrel by 1316GMT, still up 92¢ from the previous close. US West Texas Intermediate crude futures were up 53¢ at $69.00. WTI had earlier hit $69.56, its highest since November 28.
The Organisation of the Petroleum Exporting Countries (Opec) and other major producers including Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014. The Opec and its partners will meet in Jeddah, Saudi Arabia, on April 20. The Opec will then meet on June 22 to review its oil production policy.
reported on Wednesday that top oil exporter Saudi Arabia would be happy for crude to reach $80 or even $100 a barrel, which was viewed as a sign that Riyadh will not seek changes to the supply pact.
“The Saudis and their colleagues in the Opec need higher oil for their fiscal positions and the kingdom is on a bold and costly reform programme. So they might continue to squeeze the lemon while they have the chance,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Since the start of the supply cuts, crude inventories have declined gradually from record highs towards long-term average levels.
In the United States, the Energy Information Administration said on Wednesday that commercial crude stocks fell close to the fiveyear average of about 420 million barrels. Also supporting prices is the possibility that the US might reimpose sanctions on Iran, the Opec’s third-largest producer, which could result in further supply reductions from the Middle East.
But some analysts saw limits to the bull market.
“We feel we are at the point where further price support is unlikely unless there is an [unexpected Opec] supply cut,” said Georgi Slavov, head of research at brokerage Marex Spectron. —
london — Talk that Saudi Arabia has its sights on $80-$100 a barrel oil again ignited a fierce rally in commodities and resource stocks on Thursday, though the potential boost to inflation globally put some pressure on fixed-income assets.
It was set to be the strongest day for the commodity complex in eight months as Brent crude futures climbed past $74 a barrel after a near 3 per cent jump overnight.
The surge came on a report that the Opec’s new price hawk Saudi Arabia would be happy for crude to rise to $80 or even $100, a sign Riyadh will seek no changes to a supply-cutting deal even though the agreement’s original target is now within sight.
“The Saudis and their colleagues in the Opec need higher oil for their fiscal positions and the kingdom is on a bold — and costly — reform program,” said Greg McKenna, chief market strategist at CFD and forex provider AxiTrader.
The leap in oil combined with fears that sanctions on Russia could hit supplies of other commodities to light a fire under the entire sector. Nickel jumped the most in 6-1/2 years on talk Nornickel — the world’s second-biggest producer of the metal — could be targeted.
Aluminium prices reached their highest since 2011, its raw material alumina touched an all-time peak, while iron ore leapt 5 per cent. Such increases, if sustained, could fuel inflationary pressures and investors hedged by selling sovereign bonds.
Yields on US two-year Treasuries stood at levels last visited in 2008 at 2.43 per cent and 10-year jump in Brent crude futures pushes its price past $74 a barrel German yields went above 0.55 per cent for the first time in almost a month.
“If oil prices were to move toward $80 a barrel and euro weakened a bit, there could be some inflation pressure,” said Rabobank’s head of macro strategy Elwin de Groot.
“That usually has a negative impact on spending and could do here, especially if it comes on the back of these trade and geopolitical tensions.”
Resource stocks were the big winners, driving Chinese blue-chips up 1.1 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.9 per cent, with energy up over 2.6 per cent.
Japan’s Nikkei faded late in the day to end up 0.15 per cent, but basic materials and utilities both climbed more than 2 per cent. Industrial and commodities-focused stocks also led the pack in London, Paris, Frankfurt and Milan though the pan-regional Stoxx 600 was showing some signs of fatigue after a two-day rally had taken it to a sixweek high.
The bullish sentiment in markets comes amid wider optimism about economic growth. The global economy is expected to expand this year at its fastest pace since 2010, the latest polls of over 500 economists worldwide suggest, but trade protectionism could quickly slow it down.
Investors were also relieved that no new US demands on trade came out of a summit between Japanese Prime Minister Shinzo Abe and US President Donald Trump.
E-Mini futures for the S&P 500 were pointing to a steady start in New York later.
Wall Street had also seen hefty gains in the energy and industrial indexes, though that was offset by softness in sectors such as consumer staples and financials. —