Oil prices steadied on Thursday, October 5, on expectations that Saudi Arabia and Russia would extend production cuts, although record U.S. exports and the return of supply from a Libyan oilfield dragged on the market.
Brent crude LCOc1 was up 35 cents at $56.15 a barrel by 1000 GMT. U.S. light crude CLc1 was up 10 cents at $50.08.
Both crude benchmarks have fallen more than 5 percent over the last week as investors have booked profits after almost three months of gains.
“OPEC and Russia are talking about extending production limits, but there’s still plenty of supply with U.S. crude exports up sharply,” said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt.
Russian President Vladimir Putin said this week that a pledge by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to cut oil output to boost prices could be extended to the end of 2018, instead of expiring in March 2018.
Russian Energy Minister Alexander Novak said on Thursday that Moscow would support new countries joining the agreement to restrict oil supply.
The statement came as Saudi Arabia’s King Salman visited Moscow.
“Putin and Salman will most likely reach, but not announce, an agreement to extend the OPEC/non-OPEC production deal, though with a commitment to taper the cuts,” said Eurasia Group.
The pact on cutting output by about 1.8 million barrels per day (bpd) took effect in January this year.
Despite this, other factors weighed on oil prices, including the return to production of Libya’s Sharara oilfield after an armed brigade forced a two-day shutdown.
Higher U.S. oil exports also dampened market sentiment.
U.S. crude oil exports jumped to 1.98 million bpd last week, surpassing the 1.5 million bpd record set the previous week, the Energy Information Administration said.
The increase followed a widening of the discount for U.S. crude against Brent WTCLc1-LCOc1, making U.S. oil attractive on world markets.
Beyond short-term market drivers, analysts at Barclays said future oil demand could be undermined by improving fuel-efficiency and the rise of electric vehicles (EV).
If the uptake of EVs rose to one-third of new cars by 2040, as many industry analysts expect, up from just 1 percent now, that could “affect oil demand by around 9 million bpd”, Barclays said, Reuters reports.
Pound Slumps to Three-week Lows, Sheds 0.8%
British Pound Sterling on Thursday, October 5, to a fresh three-week low as rising political uncertainty prompted investors to cut their long positions put in place after the Bank of England signalled a potential rate hike.
The British pound fell 0.8 percent to $1.3144 against the dollar, its lowest since Sept. 14 when the Bank of England meeting took place.
The BoE surprised investors when it said most of its rate-setters thought it was likely that borrowing costs would need to rise “in the coming months”, as it saw growing upward pressure on inflation, Reuters reports.
Global Stock Markets Fall Off Record Highs
Global stocks came off record highs and the euro fell back toward seven-week lows on Thursday, October 5, as minutes from the European Central Bank’s last meeting showed policymakers had widespread concerns about the single currency’s rapid rise.
The ECB’s plans to map an exit from an era of ultra-easy monetary conditions could be complicated by the euro’s strength, while uncertainty over who will succeed Janet Yellen at the helm of the U.S. Federal Reserve is also keeping investors occupied.
With a number of Fed policymakers due to speak on Thursday, including one of the leading candidates for the Fed Chair post, Jerome Powell, there should be more clues on how a recent batch of mixed economic data has affected their thinking.
“With the Fed having indicated at the last meeting that it still intends to raise interest rates again this year, it will be interesting to hear whether the data since then has changed this view or whether the same still applies,” said Craig Erlam, senior market analyst at currency broker Oanda.
Monetary policy stole focus from political tensions in Spain, where one of its richest regions Catalonia is set to declare independence on Monday. Spanish bonds recovered ground after firm demand at a debt sale, while its stock market was bolstered by a recovery in Catalan bank shares. [GVD/EUR]
Euro zone stocks .STOXXE more broadly steadied from a wobble on Wednesday, but with public holidays across Asia and some key data due from the world’s largest economy the United States coming up later this week, an index of global stocks edged down. .MIWD00000PUS
Wall Street was set to open a touch higher, however, eyeing another record high. ESc1
A Reuters poll showed global stocks will rise even more over the coming year as optimism about the global economy grows, but a slim majority of equity strategists polled by Reuters also said the current eight-year bull run will end in 2018.
