Oil Surges after hitting One-month Low

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Oil prices have recovered on Friday after falling to a one-month low a day earlier encouraging investors to purchase at economical levels, prior to the Organization of the Petroleum Exporting Countries (OPEC) meeting in May where manufacturers could extend the production cuts.

Growth was also supported by a drop in the dollar and indications that Russia, a non-OPEC member, was completely agreeing with the output limits decided among major producers last year by cutting 300,000 barrels per day.

Saudi Arabia’s energy minister was pleased about the news saying Russia’s involvement was good and that total non-OPEC compliance was 85 percent.

The US Dollar Index (DXM7) was down 0.09 percent to $98.93 on Friday.

U.S. West Texas Intermediate (WTI) crude was up 0.9 percent to $49.43 a barrel while Brent oil futures were also 0.9 percent high to $52.31 per barrel.

Gasoline RBOB futures also edged up 0.6 percent to 1.5727 on Friday.

However, oil prices were still heading off for its second straight weekly and monthly losses for two reasons. First, is the Thursday’s crude prices fall following the restart of two main Libyan oilfields the Sharara and El Feel due to disputes of an armed group that had blocked the pipelines there.  Second, are concerns over the OPEC output cut said to have been unsuccessful to completely constrict the saturated market.

WTI crude is set for small weekly loss about 8 percent below its peak in April. Brent is already almost down around 8.5 percent from this month’s peak and is still on track for second although small week of declines.

OPEC and other manufacturers including Russia agreed at the start to cut production by almost 1.8 million barrels per day, this was only during the first half of the year. However, OPEC gave in to demands to extend the cuts in order to cover the whole 2017 so as to take care of brimming supplies in other places.

The organization stated that the output cut will be extended bumping into the reality of the restart of two Libyan oilfields and persisting expansion of US shale oil.

Meanwhile, Russia has called for its state-owned companies to pay out half of their earnings in dividends this year in an effort made by the government to drive corporations such as Gazprom, Roseneft, Aeroflot and Alrosa to block openings in the federal budget.

Shares in the state-run companies went up on Friday after the announcement.

Gas group Gazprom’s shares rose 2 percent to 136.21 in Moscow as of 12:50 GMT. The company said on Thursday that it plans to pay out 7.89 rubles ($0.14) per share in dividends less than would be approved by the 50 percent demand.

Russia’s biggest oil company and largest oil producer by output Rosneft has decided to give 35 percent of its 2016 profits in dividends.

Moscow’s index MICEX (MCX) boosted 0.3 percent to 2,019 on Friday.

Last February, Russia’s deputy economy minister Olga Dergunova said that raising dividend costs could bring as much as 110 billion rubles ($1.9 billion) of additional budget profits.

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Extension to OPEC Output Deal Leads to Oil Price Hike

Oil prices rose on Wednesday for its seventh session over the growing anticipation of an extension to OPEC’s agreement of output cuts.

Global benchmark Brent oil futures edged up by 0.6 percent to $56.58 a barrel at 10:59 GMT while US crude oil (WTI) rose 0.5 percent to $53.68.

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The increase in oil prices was due to the reports on the subject of Saudi Arabia telling other producers from the Organization of the Petroleum Exporting Countries (OPEC) to extend the production cut that will expire in June for another six months when they meet in Vienna on May 23, 2017. This is done for the purpose of speeding up the rebalance in the market.

During the first half of 2017 OPEC and other producers, includingRussia, have agreed to cut production by around 1.8 million barrels per day (bpd) so as to control over supply. Saudi Arabia decided to reduce more than it authorized which has helped to make up for a less strict agreement by other participants in the deal.

Turns out Saudi Arabia’s cut appeared to be one step ahead of the estimate and gave oil a boost. The country is also protecting its most important clients in Asia from the cuts, continuing to supply them with all contractual amounts.

Moreover, OPEC has raised its forecast for oil demand to 1.27 million barrels per day a major change of 10,000 barrels per day. OPEC’s monthly oil report on Wednesday come as OPEC countries cut oil production in March more than expected. In accordance with  the deal, it averaged 104 percent based on OPEC’s output figures.

The cut in production came due to irregular oil prices. The OPEC Reference Basket (OBR) went down 5.7 percent in March to 50.32 bpd. Although the OBR gained a rapid increase in prices for both the quarter and the year, indicating that the OPEC production cuts which began in 2016 was a success.

Also, growth within OECD developed nations is expected at 1.9 percent within the US and the euro area seeing no changes on previous forecasts. China’s forecast growth in demand was revised from 6.2 percent to 6.3 percent

OPEC stated that policy issues and monetary policy decision will be the main aspects in ensuring this growth, but, as will maintaining stability in commodity prices.

Meanwhile, the US production and inventories are increasing. According to the government’s Energy Information Administration (EIA) on Tuesday, the country’s crude output will rise from 9.2 million bpd this year to 9.9 million bpd in 2018 with demand expectedto increase by 340,000 bpd next year which will leave rising quantities of US oil for export or storage.

Crude oil is expected to get nearly $59 per barrel and if the oil deals are extended, then almost $67 per barrel.

Official US production and inventory data will be released later on Wednesday by EIA.

It is said that the next two years could mark the largest increase in oil and gas projects production in history along with a new shale oil rise that could alone grow 1 million bpd year-on-year could create an excessive supply in 2018 and 2019.

In other energy products, natural gas (NGK7) futures for May rose 0.1 percent to $3.15 while RBOB gas futures for the same month fell 0.06 percent to 1.76 on Wednesday, 12:38 GMT.

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Oil Bounces Back After Two Days Of Roiling

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After two days of sharp sell-offs, crude oil regained its traction on Wednesday trade. Although this may be considered as good news somehow, investors still remain uncertain if the equilibrium of the supply and demand of global crude can still be restored.

International benchmark West Texas Intermediate futures for February delivery changed hands at $51.17 per barrel which is 35 cents—or 7 percent— in the Globex electronic session on the New York Mercantile Exchange. While Brent crude for March delivery was up 0.8 percent or 39 cents to $54.04 per barrel.

A 6 percent fall in the previous two US trading sessions leading to bargain-hunting was the main driver of the recent buying as analysts see it. With speculations that some OPEC producers that agreed with the deal were still producing way beyond agreed quotas, the contradiction seemed inevitable. Also, others such as Iran were in an aggressive sell-off of inventories.

In a report by the Wall Street Journal Tuesday, Libyan armed forces have penned deals that permit the National Oil Co. (NOC) to revive key infrastructures for petroleum production. This consequently led to a three-year high increase of 708,000 barrels a day in Libya’s production for this week after a fall of below 200,000 barrels a day, a representative of NOC said.

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NOC thinks that it can raise its production higher from its average daily production of 575,000 barrels a day in November during the announcement of the OPEC deal to 900,000 barrels a day this year.

Even if the production cut pledge took effect earlier this month, the market would still have to wait until mid-February when the Organization of the Petroleum Exporting Countries will release its January production data to notice the premature effects of the output curb.

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FTSE On An Uptick; RBS Fails Stress Test

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The UK stock index finished with an uptick on Thursday, with oil-backed equities soaring in expectations of a successful OPEC production cut deal. On the other hand, after failing the stress test given by the Bank of England, the stocks of the Royal Bank of Scotland PLC dropped.

The FTSE 100 was up 0.6 percent at 6,811.95 following a drop of 0.4 percent on Tuesday, its second consecutive decline.

As trading wraps-up for November, oil and banking industries gain the center stage Wednesday which is anticipated to set the FTSE 1000 on a monthly decline of around 2 percent. Following five months of gains, this might become the index’s first monthly loss.

OPEC Outlook Lifts

International benchmark US West Texas Intermediate crude prices leaped 3.5 percent, while Brent crude surged 4 percent, after reports of OPEC Secretary General Mohammad Barkindo confirming that the international oil cartel is sure to reach a production-cut deal on Wednesday in their official meeting in Vienna.

Stakes of oil producers like BP PLC and Royal Dutch Shell PLC accelerated gains. Both stocks inched higher, with 2.2 percent and 3 percent, respectively.

The OPEC deal aims to address the current international oil supply glut that has been sending prices downward for the past two years. The first proposal was to cut the group’s oil output by above a million barrels a day, or around 1 percent of the world’s supply.

Stress Test Failure

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With its failure in the tougher stress test for systemic UK banks, Royal Bank of Scotland made a 1.9 percent slump, off session lows. Now they must come up with an improved plan to generate capital, Bank of England stated Wednesday. RBS ought to come up with around £2 billion ($2.5 billion) in capital.

The stress test also disclosed capital insufficiencies at Standard Chartered PLC and Barclays PLC, but these banks are not required to submit new capital plans since they’ve already carried out their own actions to strengthen their capital, the BOE disclosed in a statement.

Standard Chartered stocks were down 0.4 percent and Barclays stakes had not much movement at £2.14 each.

“The key take away from the report is that the outlook for financial stability is challenging, Brexit and high levels of household debt have been cited as the key reasons for this,” said City Index research director Kathleen Brooks in a note.

“On the positive side, the BOE said that the U.K. is well able to finance its huge current account deficit, and the banking system, although not perfect, is in a position to support the U.K. economy, even in a severely stressed scenario,” she added.

Late Tuesday, the pound changed hands at $1.2479, down from $1.2503, in New York.

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