Brent for December settlement increased 51 cents, or 1 per cent, to $US50.70 a barrel on the London-based ICE Futures Europe exchange. The November contract expired last Friday. Photo: Andrey Rudakov
Oil advanced to a three-month high in New York as traders continued to assess last week’s change in OPEC policy.
Futures rose as much as 1.3 per cent after climbing 8.5 per cent last week. While OPEC outlined an accord to curb output by as much as 750,000 barrels a day, Libyan production rose and will advance further this month, according to an official of the state oil company. Independent oil companies are using the rally that followed the agreement to hedge their price risk for next year, banks and consultants said. Rigs targeting crude in the US rose to the highest level since February, Baker Hughes said on its website Friday.
Oil capped the biggest monthly gain since April after the Organisation of Petroleum Exporting Countries agreed to trim supply for the first time in eight years. While quotas will be decided at the group’s official meeting in Vienna on November 30, Nigeria and Iran have said they are exempt and Iraq has said it doesn’t accept OPEC’s estimates of its production levels. Russia boosted output last month to a post-Soviet record.
“It’s interesting that oil today is buffeted by contradictory expectations on the impact of the OPEC meeting,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London. “But looking at today’s announcements from Iran, more hedging interest by US producers, potential upside in Libya and Nigeria, the supply impact of the Algiers accord, even if they agree on the allocation of cuts in Vienna next month, is likely to be muted.”
West Texas Intermediate for November delivery rose 36 cents, or 0.8 per cent, to $US48.60 a barrel at 1.50pm on the New York Mercantile Exchange. Prices reached $US48.87, the highest since July 5. Total volume traded was 17 per cent below the 100-day average. Futures rose 7.9 per cent in September.
Brent for December settlement increased 51 cents, or 1 per cent, to $US50.70 a barrel on the London-based ICE Futures Europe exchange, trading at a $US1.53 premium to WTI for December delivery. The November contract fell 0.4 per cent to expire at $US49.06 on Friday.
Libyan oil output rose to 500,000 barrels a day and will climb to 600,000 a day by the end of October, said Ibrahim Al-Awami, head of National Oil Corp’s oil measurement department. The country pumped 260,000 barrels a day in August, data compiled by Bloomberg show. Libya produced about 1.6 million barrels a day before the 2011 uprising that ousted longtime leader Moammar Al Qaddafi, but output has tumbled as militias vied to control energy facilities.
OPEC’s third-largest member Iran wants to increase exports to 2.35 million barrels a day in the coming months, state news agency IRNA reported. The Islamic republic is currently shipping 2.2 million a day.
Iran could boost output to 4.1 million or 4.2 million barrels a day from 3.7 million currently, yet further increases will take time, Paolo Scaroni, vice chairman of NM Rothschild & Sons and former chief executive officer of Eni SpA, said in a Bloomberg Television interview.
Production increases from Iran, Nigeria and Libya offset lower output from Saudi Arabia last month, meaning overall OPEC production held steady, according to Vienna-based consultants JBC Energy GmbH.
“The problem with the OPEC meeting is that it didn’t provide a lot that was substantial,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $US5.2 billion. “The staying power of this agreement is unknown. Past experience shows that if the Saudis are willing to cut and allow others to take market share it will work, and if they aren’t, it will fail.”
US drillers added seven rigs targeting crude during the week ended September 30, increasing the count to 425, according to Baker Hughes. The US is pumping at a rate of 8.5 million barrels a day, weekly data from the Energy Information Administration show.Russian output climbed to 11.11 million barrels a day in September, according to data from the Energy Ministry’s CDU-TEK unit.Investors increased their long position in WTI by 24,131 futures and options, or 8.1 per cent, during the week ended September 27, according to the Commodity Futures Trading Commission. Bets on falling prices dropped.Net-bullish positions in Brent oil fell 7 per cent, or 21,924 contracts, to 290,178, according to ICE data.