Futures rose as much as 2.4 percent in New York on Friday before paring some of those gains. Russia deepened its output cuts and Energy Minister Alexander Novak said he will discuss their extension a day after it was reported Russia had been considering letting them lapse in September. Meanwhile, demand fears eased somewhat on the resumption of trade talks between China and the U.S. and predictions of continuing growth this year by two Federal Reserve presidents.
“The Russia situation seemed a bit wobbly yesterday with some of the statements that were coming out of OPEC and Russia,” said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. This morning’s chatter reassured the market’s optimism for the cuts, he said.
Oil has gained 32 percent to start the year as Saudi Arabia leads the Organization of the Petroleum Exporting Countries and its allies in squeezing supplies to prevent a glut. Whether the U.S. will extend waiversallowing some countries to keep buying Iranian oil is shaping up as a key supply risk, while slowing global economic growth is capping further gains.
“The energy complex has put in a stellar price performance in the first three months of this year,” PVM Oil Associates analyst Stephen Brennock wrote in a report. “The fundamental backdrop is poised to tighten in the coming quarter.”
West Texas Intermediate for May delivery rose 70 cents to $60.00 a barrel on the New York Mercantile Exchange as of 10:27 a.m. local time. The contract is on pace to rise for the fourth week in a row, and its biggest quarterly gain since June 2009.
Brent for May settlement, which expires Friday, climbed 49 cents to $68.31 a barrel on the London-based ICE Futures Europe exchange. It’s risen 27 percent this quarter. The global benchmark crude was at a premium of $8.23 to WTI.
Trade Talks
New York Fed chief John Williams’ comments boosted sentiment as the U.S. and China resumed trade talks. The Trump administration is prepared to keep negotiating for weeks or even months to reach a deal that will ensure China improves market access and intellectual-property policies for U.S. companies, White House economic adviser Larry Kudlow said in a speech in Washington.
A lack of clarity on the Iran waiver extensions is generating uncertainty on the supply side. While South Korea requested “maximum flexibility” in renewing the waivers that lapse in early May, the U.S. has reaffirmed its original stance to further strengthen pressure and sanctions against Iran. Refiners in Japan, which resumed oil purchases from Iran in February, are still not certain about buying crude from there after next month.
The United States Oil Fund LP (USO) was trading at $12.47 per share on Friday afternoon, up $0.12 (+0.97%). Year-to-date, USO has gained 3.83%, versus a 6.12% rise in the benchmark S&P 500 index during the same period.
USO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 108 ETFs in the Commodity ETFs category.
This article is brought to you courtesy of Bloomberg.
