Oil Rises to New Two-Year High
November 24 2017 - 2:59PM
Dow Jones News
By Stephanie Yang
Oil prices rose for the third session in a row Friday, as
falling stockpiles and expectations for extended supply cuts
boosted optimism in the market.
Light, sweet crude for January delivery advanced 93 cents, or
1.6%, to $58.95 a barrel on the New York Mercantile Exchange,
trading at the highest level since June 2015. Brent, the global
benchmark, gained 31 cents, or 0.5%, to $63.86 a barrel.
Prices have rallied this week on data from the U.S. Energy
Information Administration that showed crude stockpiles fell by 1.9
million barrels last week, a sign that the rebalancing in the oil
market is having an impact on U.S. storage.
Investors are also betting on an extension of a deal between the
Organization of the Petroleum Exporting Countries and other major
global producers, who agreed to curb output last year in an attempt
to bring global stockpiles back down to the five-year average.
To hit that target, analysts say OPEC will have to continue the
agreement past March 2018, at which the current deal would expire.
The group of oil producing nations is set to convene Nov. 30 in
Vienna.
According to media reports, the cartel is in talks with Russia
on the outline of a potential extension, though details are still
being worked through. Russia's participation in extending the deal
has been one point of concern and uncertainty for investors, even
as Saudi Arabia has spoken strongly in favor of more supply
cuts.
"Expectations are super high," said John Saucer, vice president
of research and analysis at Mobius Risk Group. "Nothing's really
changed in terms of fundamentals. We keep seeing draws in
stocks."
Disruptions to oil supply from the Keystone pipeline have also
pushed prices higher. Traders expect stockpiles at Cushing, Okla.,
an important storage hub and pricing point for U.S. crude, to
continue to fall as flows are reduced.
"The energy bull has been reawakened this week," said Jim
Ritterbusch, president of Ritterbusch & Associates, in a Friday
research note.
Market sentiment has vastly improved since oil fell into a bear
market earlier this year, as signs of reduced supply have pushed
prices to two-year highs. However, analysts caution that increasing
U.S. shale production could pose a problem, as output has climbed
to weekly record highs, according to EIA data.
Analysts are also predicting increased volatility ahead of the
OPEC meeting next week, and warn that even an announcement that
meets expectations could spark a selloff if investors decide to
take profits.
"Uncertainty with regards to how Russia sees to best serve its
national interest means that there is room for disappointment at
next week's OPEC meeting," said Harry Tchilinguirian, head of
commodity market strategy at BNP Paribas, in a report Friday.
"Ultimately, the degree of Russia's involvement in an extension of
producer cuts will be paramount in guiding oil market expectations
forward."
Gasoline futures gained 1.1% to $1.7880 a gallon, and diesel
futures rose 1.1% to a two-year high of $1.9529 a gallon.
Write to Stephanie Yang at stephanie.yang@wsj.com
(END) Dow Jones Newswires
November 24, 2017 14:44 ET (19:44 GMT)
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