‘OPEC may cut crude output quotas again’.
Crude oil rose for a second day as interest rate cuts in the US and China, the world's two- biggest energy consumers, spurred optimism that a global economic recovery will boost demand for fuels.
Oil is set for its biggest two-day gain in five weeks after the U.S. Federal Reserve reduced rates by half a percentage point. China and Taiwan lowered rates while Japan may reduce its benchmark interest rate tomorrow and the European Central Bank is slated to do the same next week.
“The Fed delivered their expected rate cut and that's another boost for the economy,” said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. “The rate cut in China also provided a bit of a stimulus.”
Crude oil for December delivery climbed as much as $2.30, or 3.4 per cent, to $69.80 a barrel. It was trading at $69.58 at 11.43 am. Singapore time on the New York Mercantile Exchange. Yesterday, crude oil jumped $4.77, or 7.6 percent, to settle at $67.50 a barrel. That was the biggest gain since Sept. 22, bringing the two-day increase to 11 percent.
Oil prices, which have tumbled 53 percent since reaching a record $147.27 on July 11, are down 23 percent from a year ago.
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Crude prices also climbed as the dollar extended yesterday's decline, falling to a one-week low against the euro. The dollar fell to $1.3183 per euro, the lowest since Oct. 21, and traded at $1.3170 as of 11.16 am in Tokyo from $1.2963 late yesterday. The yen weakened to 98.40 per dollar from 97.39.
“With the US dollar weakness, that provided the impetus for the rally'' in oil, said Commodity Warrants' Hassall.
Investors often purchase crude oil and other dollar-priced commodities when the U.S. currency drops because of their use as an inflation hedge.
The Organization of Petroleum Exporting Countries will “probably'' cut crude-output quotas a second time to avoid the growth of inventories, Venezuelan Oil Minister Rafael Ramirez said in an interview on state television.
OPEC reduced its production target by 1.5 million barrels a day after meeting Oct. 24. Ramirez said the group would analyze the reaction of the oil market between that cut and a planned December 17 meeting.
US inventories of crude oil and distillate fuel, a category that includes heating oil and diesel, rose last week, an Energy Department report yesterday showed.
Crude oil stockpiles climbed 493,000 barrels to 311.9 million barrels in the week ended Oct. 24, the department said. A 1.55 million-barrel gain was forecast, according to the median of 12 analyst estimates before the report.
Distillate inventories rose 2.33 million barrels to 126.6 million barrels last week. Analysts forecast that supplies increased 1.05 million barrels. Gasoline stockpiles dropped 1.51 million barrels to 195 million barrels, the first decline in five weeks. A 1.5 million-barrel gain was forecast.
Imports of crude oil fell 0.6 per cent to 10.3 million barrels a day last week, the Energy Department said. The amount of oil products brought from overseas declined 12 percent to 2.9 million barrels a day.
“The numbers were a bit bullish but that was mainly due to the imports,” said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore. “That was responsible for the gasoline draw and also in terms of crude. Just because there is less demand.”
US fuel demand during the past four weeks averaged 18.9 million barrels a day, down 7.8 percent from a year ago, the report showed. Gasoline consumption was down 3.4 percent at 8.9 million barrels a day over the period.
Demand for residual fuel, a category that includes heavy fuel oil, averaged 436,000 barrels a day during the period, down 31 percent from a year earlier.
Some manufacturers and utilities can switch between residual fuel and natural gas depending on costs. The department measures shipments from refineries, pipelines and terminals to calculate demand.
Brent crude oil for December settlement rose as much as $2.17, or 3.3 percent, to $67.64 a barrel on London's ICE Futures Europe exchange. It was at $67.44 a barrel at 11.45 a.m. Singapore time. The contract yesterday gained $5.18, or 8.6 percent, to $65.47 a barrel.