Crude Oil prices rise on Saudi commitment; investors flee gold
Riyadh-Saudi Arabia (Dec 11) Oil advanced on Friday, as Saudi Arabia was said to have informed its customers it would stand by its commitment to cut production before OPEC meets with producers from outside the group to discuss reductions.
Futures climbed 1.3 percent, extending Thursday’s 2.2 percent gain. Saudi Arabian Oil Co’s customers received notice that crude shipments next month would be cut in line with the Nov. 30 OPEC agreement, a Gulf oil official said.
Russia will fulfill its pledge to cut output by as much as 300,000 barrels a day if OPEC follows through on its commitment, according to a Russian government official familiar with the matter.
Ten non-OPEC nations were expected to attend the meeting with the group in Vienna yesterday, people familiar with the matter said.
The group will accept natural declines from some nations, rather than insisting on active cuts, in its effort to secure a 600,000-barrel-a-day reduction from non-members, according to people familiar with the matter. Getting nations from outside the group to join in the cuts is important, because an OPEC cut alone could fall short of the group’s goal to drain stockpiles.
“There’s a growing consensus that OPEC and non-OPEC countries will succeed in coming to an agreement tomorrow [yesterday],” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “These Saudi notices to refiners that they are in the process of following through with the cuts makes the accord much more real than it has been.”
West Texas Intermediate (WTI) for January delivery rose US$0.66 to US$51.50 a barrel on the New York Mercantile Exchange. It is the highest close since Monday when prices closed at a 16-month high of US$51.79. Total volume traded was 29 percent above the 100-day average at 2:51pm. Prices slipped 0.3 percent this week.
Brent for February settlement increased US$0.44, or 0.8 percent, to US$54.33 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a US$1.89 premium to February WTI.
Meanwhile, gold futures closed at the lowest level since February, as the US Federal Reserve gears up to raise rates, while US equities at record levels lure money out of havens and fund holdings wither. Assets in bullion-backed exchange-traded funds contracted for a 20th straight day as of Thursday, the longest stretch since May 2013.
The precious metal is ending the year on the ropes as investors price in the Fed’s probable move next week, pushing bond yields higher amid the likelihood of further hikes next year.
A gauge of the US dollar has climbed since the US election, while the S&P 500 and the Dow Jones Industrial Average are at all-time highs amid speculation US president-elect Donald Trump’s policies will spur growth. Investors are also assessing the European Central Bank’s decision on Thursday to tweak its bond buying.
“The rally in the dollar, bond yields edging higher and the positive performance of the equity markets are signs of risk-on appetite, which is negative for gold,” said James Steel, chief precious-metals analyst at HSBC Holdings PLC in New York. A rate hike “looks pretty likely.”
Gold futures for February delivery fell 0.9 percent to settle at US$1,161.90 at 1:59pm on the Comex in New York. It was the lowest close since February. Bullion dropped 1.3 percent on the week for a fifth consecutive weekly loss, the longest run since November last year.
Source: TaipeiTimes
