Oil on Friday rose for the first time in three days after the US dollar’s advance stalled and attention shifted back to projected production cuts.
Futures rose 2 percent in New York. Prices dropped the previous two days as the US dollar climbed against major peers after the US Federal Reserve raised interest rates, which curbed the appeal of commodities to investors.
Goldman Sachs Group Inc increased its second-quarter oil price forecasts and predicted inventories would return to normal levels by the middle of next year as OPEC production cuts ripple through the market.
Photo: Bloomberg
Oil has traded near US$50 a barrel since OPEC on Nov. 30 agreed to trim output for the first time in eight years.
A broader deal reached last weekend in Vienna with 11 non-members, including Russia, encompasses countries that pump about 60 percent of the world’s crude.
“The main reason we’re moving higher today [Friday] is that the [US] dollar is mostly flat,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis, which oversees US$6.1 billion. “OPEC is getting the benefit of the doubt and there’s hope that the economy will grow strongly next year, which will be good for demand.”
West Texas Intermediate (WTI) for January delivery rose US$1 to close at US$51.90 a barrel on the New York Mercantile Exchange on Friday. Total volume traded was about 19 percent below the 100-day average at 2:40pm. Prices on Tuesday closed at the highest since July last year and ended the week up 0.8 percent.
Brent for February settlement on Friday increased US$1.19, or 2.2 percent, to US$55.21 a barrel on the London-based ICE Futures Europe exchange. The contract is up 1.6 percent this week.
The global benchmark crude closed at a US$2.26 premium to February WTI.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed after rising 1.9 percent the prior three days. The greenback surged on Thursday, which makes commodities priced in the currency less attractive to investors.
“This is a range-bound market,” Thomas Finlon, director of Energy Analytics Group in Wellington, Florida, said by telephone on Friday. “We went down to test US$50 yesterday and it held. The market is being moved by two major forces, the OPEC and non-OPEC agreements to cut supply are supportive while the strength of the [US] dollar will limit how high prices can go.”
Goldman raised its WTI price forecast to US$57.50 a barrel from US$55 for the second quarter of next year and its Brent forecast for the same period to US$59 from US$56.50, according to a report on Friday.
If stockpiles held by countries in the Organisation for Economic Co-operation and Development fall, which the analysts see happening in the second quarter of next year, prices could rise.
Oil market news:
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‧ OPEC’s deal to cut production and boost prices gives oil companies the opportunity to start investing again — if they still have the risk appetite, according to analysts and investors.
‧ North Sea crude in floating storage last month fell by more than 50 percent from a month earlier as tankers that held crude for as many as four months find homes, ship-tracking data compiled by Bloomberg show.
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