Oil Rallies on OPEC Cut Talks, Storm
NEW YORK (DTN) -- New York Mercantile Exchange oil futures rallied to the highest close since June for the spot-month West Texas Intermediate and ICE Brent crude oil contracts on concern over potential disruptions caused by Hurricane Matthew that could tighten products supply in the U.S. East Coast.
The rally also was supported by reports the Organization of Petroleum Exporting Countries will meet again in Turkey this weekend with non-OPEC nations such as Russia and Mexico to consider further production cuts above those agreed to last week in Algiers.
"The storm is the biggest story because it could lead to a steep drop in petroleum inventories," said analyst Phil Flynn at Price Futures in Chicago. "Imports aren't coming in. But at the same time, the news of OPEC meeting this Sunday in Istanbul to solidify their agreement last week is a big deal. They may even cut more production, and so it means the agreement to cut output is taking shape and people are taking it seriously."
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NYMEX November WTI crude futures settled 61 cents higher at $50.44 per barrel (bbl), ending near a four-month spot high of $50.58. This is the first time WTI has crossed over $50 bbl since June 24, with the settlement the highest price since June 10.
ICE November Brent futures added 65 cents for a $52.51 bbl settlement, edging off a fresh four-month spot high of $52.65.
In products trade, NYMEX November ULSD futures contract settled 1.35 cents higher at $1.5958 gallon and near a $1.5986 fresh one-year spot high. NYMEX November RBOB futures seesawed on either side of Wednesday's close before settling 0.50 cent higher at $1.4978, down from a five-week spot high of $1.5163 registered Wednesday.
Concern over the potential impact of Hurricane Matthew dominated the market today, with additional support from Wednesday's Energy Information Administration report that showed crude oil stocks fell 3.0 million bbl to 499.7 million bbl in the week-ended Sept. 30, the fifth straight weekly decline while below 500.0 million bbl for the first time since January.
Hurricane Matthew, one of the most powerful storms in nearly a decade, pounded the Bahamas on Thursday en route to U.S. southeast coastline after killing over 140 people on its deadly northward march. Matthew, a category 4 storm with winds of 140 mph, was bearing down on Florida's Atlantic coast, the National Hurricane Center said.
Federal and state officials gave dire warnings, with Florida likely to bear the brunt of the storm, which could be catastrophic. Two million people have been evacuated from the path of the storm in Melbourne, Fla. Matthew is projected arrive tonight and might proceed northward to Georgia and the Carolinas by the weekend. The storm is expected to impact travel, gasoline deliveries and demand in the region, said analysts.
Meantime, OPEC's 14 member nations will hold another informal meeting Sunday in Turkey, where they plan to agree on further output cuts. On Sept. 28 in Algeria, OPEC pledged to a production rate in a 32.5 million barrels per day (bpd) to 33.0 million bpd range, down from an output rate in August of 33.235 million bpd.
George Orwel can be reached at george.orwel@dtn.com
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