Oil- cut extension favored
Russia, Saudi Arabia say curbs will sap supply, raise price.
Oil prices jumped to their highest levels in more than two weeks after Saudi Arabian and Russian energy ministers stoked expectations that production cuts might be extended for as long as nine months.
Futures closed at their highest in more than two weeks. While output curbs that started Jan. 1 are working, global inventories aren’t yet at the level targeted by OPEC and its allies, Saudi Energy Minister Khalid AlFalih said Monday in Beijing alongside his Russian counterpart, Alexander Novak. The ministers agreed the deal should be extended through the first quarter of 2018 at the same volume of reductions, they said.
“When Saudi Arabia and Russia come out together it sends a very strong signal to the market,” said Mike Wittner, head of commodities research at Societe Generale SA in New York. “With these two countries behind the extension of the accord, chances are very high that they will get all of OPEC behind it.”
Russia and Saudi Arabia, the largest of the 24 producers that agreed to cut supply for six months, are reaffirming their commitment to the deal amid growing doubts about its effectiveness so far. An increase in Libyan output, together with a surge in U. S. production and signs of recovery in Nigeria, may undercut OPEC’s strategy to rebalance the market and boost prices.
West Texas Intermediate for June delivery climbed $ 1.01, or 2.1 percent, to $ 48.85 a barrel on the New York Mercantile Exchange. It was the highest close since April 28. Total volume traded was about 38 percent of the 100day average.
Brent for July settlement rose 98 cents, or 1.9 percent, to $ 51.82 a barrel on the Londonbased ICE Futures Europe exchange. It was also the highest close since April 28. The global benchmark crude ended the session at a $ 2.66 premium to July West Texas Intermediate.
Money managers cut their bullish Nymex West Texas Intermediate bets back to where they were before OPEC agreed to cut output, data from
edged lower.
More Americans are seeking homes as job security has improved with low unemployment. But even with construction running ahead of last year’s pace, the supply of new and existing homes across much of the country remains tight.
That’s been good news for homebuilders this year.
U. S. sales of new homes shot up in March to a seasonally adjusted annual rate of 621,000, the fastest pace in 8 months. Sales were running 12 percent higher during the first three months of this year than during the same period in 2016. April sales data are due out next week.
“Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward,” said Robert Dietz, the homebuilders association’s chief economist.
Still, builders continue to grapple with a shortage of skilled construction workers and land parcels cleared for home construction.
Sales of new homes have risen this year despite a modest rise in mortgage interest
rates.
The average interest rate on 30- year fixed- rate home loans inched up to 4.05 percent last week from 4.02 percent previously, according to mortgage buyer Freddie Mac.
The average stood at 3.57 percent a year ago and averaged 3.65 percent in 2016, the lowest level in records dating to 1971.
This month’s builder index was based on 250 respondents.
A measure of current sales conditions for single- family homes rose 2 percentage points to 76, while an outlook for sales over the next six months gained 4 percentage points to 79. Builders’ view of traffic by prospective buyers declined 1 point to 51.