Oil Futures Rally Monday

NEW YORK (DTN) -- New York Mercantile Exchange oil settled higher across the board this afternoon, rallying on strong U.S. manufacturing data that bodes well for demand, concerns about a hurricane in the Atlantic that may curtail oil imports and optimism over a deal reached last week by the Organization of Petroleum Exporting Countries to cut production.

OPEC agreed after talks in Algeria Sept. 28 to limit its oil production rate to a 32.5-million-barrel-per-day (bpd) to 33.0 million bpd range that would cut output between 235,000 bpd and 735,000 bpd from the cartel's August output rate of roughly 33.237 million bpd. That pact has supported the oil market for the past three sessions, while a bullish comment from Iran urging non-OPEC producers to act to help stabilize the market lent additional support.

Iran's President Hassan Rouhani said it was important for non-OPEC nations to support oil prices by cutting output, according to local reports. The Rouhani comment added to the bullish sentiment that gripped the market since the cartel decided to rein in output for the first time in eight years.

"People are starting to realize that OPEC is serious about market stability," said analyst Phil Flynn at Price Futures. "They are waiting for the deal to fail, but that's not happening. The fact that the United States pulled out of cooperation with Russia on the Syria issue adds another risk dynamic to the market."

Meantime, Hurricane Matthew is barreling through the Caribbean with winds of 250 mph, with computer models projecting it to land on the eastern seaboard by the weekend. Matthew, now a category 4 hurricane, is projected to plough through Haiti, Cuba and Jamaica tonight through Tuesday, flooding the region. After that, the storm is projected to move to the Florida coastline by Friday before making its way to the coastal Carolinas by Saturday and New Jersey by Sunday. "I think the hurricane will impact oil imports," said Flynn.

NYMEX November WTI crude futures settled 57 cents higher at $48.81 per barrel (bbl), near a three-month spot high of $49.02. ICE November Brent futures settled 70 cents higher at $50.89 bbl, near a 1-1/2 month spot high of $51.14.

In products trade, NYMEX November ULSD futures settled up 1.49 cents to $1.5532 gallon, off a $1.5612 better than four-month spot high. NYMEX November RBOB futures settled 0.74 cent higher at $1.4705, reversing off a three-day low of $1.4421.

On domestic supply, a survey of analysts this afternoon showed the market expects U.S. crude stocks to have been drawn down by 1.3 million bbl in the week-ended Sept. 30, while gasoline stocks are seen to have been drawn down by 500,000 bbl and distillate stocks to have dropped by 200,000 bbl.

On the economic front, the Institute for Supply Management said its index of national factory activity rose to 51.5 from 49.4 the prior month, above market expectations, with any figure above 50 indicating expansion.

George Orwel can be reached at george.orwel@dtn.com