A big week for oil and the global economy with OPEC’s meeting Thursday night our time expected to underwrite oil prices around current levels, or a bit higher by extending the current production cap for another six to nine months.
Oil futures settled Friday at their highest level in a month, up more than 5% last week as investors expressed optimism about possible price-supportive outcomes from aThursday night’s closely watched OPEC meeting in Vienna.
June West Texas Intermediate crude futures added 98 cents, or 2%, to settle at $US50.33 a barrel after touching a high of $US50.49.
That was the highest settlement since April 19. The June WTI contract, the US benchmark, expires at the end of tonight’s session and it rose 5.2% higher for the week.
In London, July Brent crude jumped $US1.10, or 2.1%, to $US53.61 a barrel. That was also a one-month high, and about 5.5% higher for the week.
Traders ignored the weekly report from oil services group, Baker Hughes which showed the 18-straight weekly rise in the number of active US oil-drilling rigs, which climbed by 8 to 720 rigs
The total active US rig count, which includes oil and natural-gas rigs, jumped by 16 to 901.
But traders prefer to focus on government figures on Wednesday showed the first week-to-week drop in domestic oil production since February, a development which also helped lift crude prices this week.
The data from the Energy Information Administration showed more than 9.3 million barrels a day were produced last week, more than half a million barrels a day above the same time in 2016.
But the US data is a sideshow to expectations from the OPEC meeting this week – all the market wants to know will the extension of the production cap be for six, nine or even 12 months – nine months seems to be the optimists’ expectation.
Saudi Arabia-led Opec and Russia, which is not an Opec member, agreed last November to curb supply by 1.8 million barrels a day for six months.
Both have backed extending the agreement to cut output until March 2018.
“With many member countries already experiencing large government and current account deficits at current oil prices, neither lower prices nor a permanent loss in output are appealing options,” said Francisco Blanch at Bank of America told Marketwatch.com.
“As a result, we believe that OPEC will stay the course, keeping production on hold over 6 to 9 months and hoping that demand improves.”
But the International Energy Agency warned last week that while the Opec-led production cuts have helped boost prices “much work remains” to drain excess inventories.
“It has taken some time for stocks to reflect lower supply when volumes produced before output cuts by Opec and eleven non-Opec countries took effect are still being absorbed by the market,” said the IEA in its monthly oil market report.
And although the oil market rebalancing is “accelerating”, and stock draws are taking place, to reach the five-year average levels that Opec is targeting “much work remains to be done in the second half of 2017”, the IEA said.
Gold prices edged higher Friday to post their largest weekly gain since mid-April, as overall declines in the US dollar and equities from a week ago fed haven demand for bullion.
Gold was up around 2.1% for a week, marked by rising volatility and political unrest in the White House.
That was the largest gain for five weeks.
Comex June gold futures rose 80 cents, or less than 0.1%, to settle at $US1,253.60 an ounce in New York.
In other metals, Comex July silver rose 12.6 cents, or 0.8%, to $US16.796 an ounce and Comex July copper rose 5 cents, or 2%, to $2.582 a pound. Silver rose around 2.3% last week, while copper was up around 6 US cents or just over 2%.
A major reason for the rise in gold and silver was the sell off in the US dollar last week.
An Index that measures the dollar against a group of major trading partner currencies fell 0.8% on Friday, wiping out the last of its post November 8 gains.
The index traded about 2.1% lower last week.
That saw the Aussie dollar end the week well above 74 US cents at 74.60, up three quarters of a US cent over the week.
