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Oil futures surge after OPEC agrees on need for output cap


Written by Myra P. Saefong

Click HERE to Read the Article by the Publisher.

Oil futures settled with a bang on Wednesday, hitting their highest level in about three weeks, following news that the Organization of the Petroleum Exporting Countries had agreed on the need to cap crude production.

Members of the oil group were considering a production limit of between 32.5 million and 33 million barrels a day, according to The Wall Street Journal, citing sources familiar with the matter. In its oil report released in September, OPEC, pegged its current production at 33.24 million barrels a day.

“OPEC has agreed to a cap production closer to levels they had back a few months ago,” said Phil Flynn, senior market analyst at Price Futures Group. “That means we will see cuts by Saudi Arabia and Russia, and Iran and Libya and Nigeria will be allowed to increase output.”

Meanwhile, a fourth-straight, unexpected weekly decline in U.S. crude inventories, also helped to support oil prices.


November West Texas Intermediate crude CLX6, +1.93% added $2.38, or 5.3%, to settle at $47.05 a barrel on the New York Mercantile Exchange. That the highest settlement since Sept. 8, according to FactSet data. The November contract for global crude benchmark Brent LCOX6, +1.58% climbed $2.72, or 5.9%, to $48.69 a barrel on the ICE Futures exchange in London.

Members of the Organization of the Petroleum Exporting Countries and other big oil producers held discussions Wednesday on the sidelines of an energy forum in Algeria on ways to help stabilize the oil market.

The market had its doubts that an output deal would be reached at the meeting as OPEC members Iran, Libya and Nigeria have all been trying to boost production, while Saudi Arabia, and non-OPEC Russia have been pumping oil at record or near-record rates.

A committee will be formed to study how to carry out the cuts and that will be reported to OPEC at its next official meeting in Vienna on Nov. 30, the WSJ report said.

U.S. crude supply falls again

Meanwhile, the U.S. Energy Information Administration reported early Wednesday that domestic crude supplies fell unexpectedly for a fourth week in a row.

Crude inventories fell by 1.9 million barrels in the week ended Sept. 23. A 3.2 million-barrel climb was expected by analysts polled by S&P Global Platts, while theAmerican Petroleum Institute late Tuesday reported a decline of 752,000 barrels.

Coming into the fourth quarter, John Macaluso, an analyst at Tyche Capital Advisors, said he expected to see consecutive builds in crude supplies as refinery maintenance season begins.

“Following numerous large draws this month, the price of oil is a telling tale of how oversupplied the market is with prices still trading in a tight range,” he said.

The EIA report also showed that total U.S. crude production edged down by 15,000 barrels a day to 8.497 million barrels a day last week, after a modest increase in the previous week.

Among the petroleum products, gasoline supplies rose by 2 million barrels, while distillate stockpiles were down 1.9 million barrels, according to the EIA.

On Nymex, October gasoline RBV6, -0.25%  rose 8.4 cents, or 6%, to $1.478 a gallon and October heating oil HOV6, +2.11%  added 8.1 cents, or 5.8%, to $1.491 a gallon.

October natural gas NGV16, -0.57%  fell by 4.4 cents, or 1.5%, to end at $2.952 per million British thermal units, in volatile trading on the contract’s expiration day. November natural gas NGX16, -0.47% the new front-month contract, settled at $3.

Tags: oil, gasoline, natural gas, crude

Written by Myra P. Saefong

Click HERE to Read the Article by the Publisher.