Oil Prices Rally on OPEC News
29 September 2016 - 08:42AM
Dow Jones News
By Nicole Friedman
Oil prices surged 5.3%, their biggest gain in more than five
months, after the Organization of the Petroleum Exporting Countries
signaled it could agree to limit production in November.
News of a possible breakthrough among OPEC members after months
of false starts caught many traders by surprise. But some analysts
are questioning how much an OPEC agreement would reduce the global
supply glut.
U.S. crude for November delivery settled up $2.38 at $47.05 a
barrel on the New York Mercantile Exchange. Brent, the global
benchmark, rose $2.72, or 5.9%, to $48.69 a barrel on ICE Futures
Europe. The oil rally gave some support to U.S. stocks, with energy
shares up 4.3% and the S&P 500 up 0.5% to 2171.37.
OPEC members agreed at a meeting Wednesday in Algeria that a
production cut is needed to lift oil prices, but the group will
wait until November to finalize a plan.
"It's telling you that there's enough pain out there where
you're starting to get some reaction from producers," said Bill
O'Grady, chief market strategist at Confluence Investment
Management. "It makes me more friendly toward the market."
The cartel hasn't taken action to freeze or cut its production
since oil prices started falling in mid-2014. Talks in April fell
apart when Iran refused to participate.
But many analysts are skeptical OPEC members would comply with
production cuts. They compete for market share against each other,
and against U.S. and other producers. OPEC members Iran, Libya and
Nigeria have said they want to increase their output.
Saudi Arabia, OPEC's biggest producer, typically pumps more oil
in the summer to meet domestic demand and less in the winter. OPEC
officials could be referring to the expected seasonal decline in
Saudi production when they talk about an output cut, analysts
say.
"There's so many holes that you could poke in this," said Bob
Yawger, director of the futures division at Mizuho Securities USA
Inc. "My reaction is, I'll believe it when I see it."
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
September 28, 2016 18:27 ET (22:27 GMT)
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