05 March 2016 — Oil prices rallied to two-month high points Friday on hopes that producers will shortly strike a deal to tackle a global supply glut.
Positive US jobs data handed a further boost to crude futures and commodity prices in general, which enjoyed a strong week overall as gold hit a 13-month peak at just under $1,280 ($1,164) an ounce.
The pick-up in oil prices this week comes after crude recently wallowed near 13-year lows below $30 a barrel, also owing to a strong dollar and tepid demand growth. Brent North Sea crude reached $38.72 a barrel on Friday — the highest level since early January.
US benchmark West Texas Intermediate hit a two-month high of $35.94. “The price rise was boosted by reports of declining supply” from OPEC (Organization of Petroleum Exporting Countries) and the United States, according to Commerzbank analyst Carsten Fritsch.
“What is more, efforts are ongoing to persuade other countries to cap their oil production, as Saudi Arabia, Russia, Venezuela and Qatar (have) agreed to do.” Nigeria on Thursday said key crude producers plan to meet this month in Russia to discuss a proposed output freeze.
Nigerian Oil Minister Emmanuel Ibe Kachikwu predicted there would be a “dramatic price movement” after the March 20 gathering, Bloomberg News reported. Crude has picked up recently following speculation over plans by major oil producers including OPEC kingpin Saudi Arabia to cap output.
Nigeria is also a part of the cartel while major oil producers Russia and the United States sit outside OPEC.
“If the big players such as Saudi Arabia, Iran, Iraq, agree to freeze output, it could help somewhat. But, the fundamentals of the market remain largely unchanged, it is still quite oversupplied,” strategist Bernard Aw at IG Markets Singapore told AFP.
“Maybe in the short term… we could see a return to maybe $40,” Aw said. – Easing concerns – Concerns about the oversupplied market were eased this week as US government data showed oil production falling to around nine million barrels per day. At about 1730 GMT on Friday, US benchmark West Texas Intermediate for delivery in April was trading up $1.13 at $35.70 a barrel.
Brent North Sea crude for May surged $1.46 to $38.55 a barrel compared with Thursday’s close. “Commodity markets have in general benefitted from the improved sentiment in financial markets over the past month,” Danske Bank said in a note to clients.
“Sentiment has improved on the back of expectation of easier global monetary policy as the European Central Bank and Bank of Japan are expected to cut interest rates and the Federal Reserve is expected to delay a further hike in interest rates.”
The US Labor Department on Friday reported that the world’s biggest economy added a robust 242,000 jobs in February, adding however that wages fell.
The headline jobs figure came in much above the 190,000 new jobs expected by analysts.
The report also upgraded jobs figures for January and said the unemployment rate held steady at 4.9 percent. But the drop in wages suggests a big pickup in part-time hiring, said FTN chief economist Chris Low.
He expressed doubt the US Federal Reserve would raise interest rates later this month. “Lots of poor-quality jobs might encourage the Fed to raise rates, but falling wages and hours should keep them at bay in March at least,” he said.