Tyler durden blog oil surges after saudis, russians agree to 9 month opec output cut extension; us futures flat talkmarkets fraction operations


In an otherwise quiet session in which European shares dropped, Asian equities rose and S&P500 futures were little changed, crude oil surged above $49 on high volume, after the Saudi and Russian energy ministers said in Beijing they favor extending the OPEC production cut for 9 months, though the end of Q1 2018.

WTI rose more than 3%, rising above the 50DMA, climbing to the highest intraday price in almost two weeks after the comments, with subsequent comments by Putin pushing crude to session highs, and Brent above both its 200 and 50 DMA.

While output curbs that started Jan. 1 are supposedly working according to the Saudi and Russian energy ministers – clearly debatable considering there has barely been any reduction in the record global inventory glut during the first 4 months of the OPEC production cut – global inventories aren’t yet at the level targeted by OPEC and its allies, Saudi Energy Minister Khalid Al- Falih said in Beijing alongside his Russian counterpart, Alexander Novak.

“The agreement needs to be extended as we will not reach the desired inventory level by end of June,” Saudi Arabian minister Khalid Al-Falih said at event with Russian counterpart Alexander Novak. “Therefore we came to the conclusion that ending will probably be better by the end of first quarter 2018”

The ministers agreed the deal should be extended through the first quarter of 2018 at the same volume of reductions, which however according to many analysts won’t be enough to decidedly lower inventories considering the recent rebound in Libya and Nigeria production as well as a the near-record production out of the US cnn premarket futures stocks markets. For now, however, it was enough to send oil surging wiping out more than 2 weeks of losses.

"This recovery in the oil and gas sector could well continue this morning on reports that Saudi Arabia and Russia have agreed to do ‘whatever it takes’ to keep a floor under oil," Michael Hewson, chief market analyst at CMC Markets, told Reuters. "(That) has prompted oil prices to extend last week’s gains."

“The foundation for the morning has been laid but it’s still managing to build on the initial gains we saw,” said Ole Hansen, head of commodities strategy at Saxo Bank. “It’s back in a bit of a sweet spot again”

Oil got a second win overnight, when moment ago President Vladimir Putin spoke at news conference in China, saying that he met with management of Russian oil and gas producers, and confirmed that Russia supports extending accord with OPEC on limiting oil output.

“I think it’s right that the decision was made not for two, three, four months but for nine months — until the middle of next year exchange rate us to canadian dollars. That is the most important condition for stability.” The Russian leader also said that he sees good chance for extending cooperation with OPEC as Saudi Arabia is interested in price stability and is complying with obligations

As a result of the overnight oil fireworks, Brent crude set fresh day high at $52.52/bbl, up 3.3% just after 6am ET; above the 50-day MA of $52.32, after earlier breaking above the 200-day MA, which is now at $51.73 investing com aud usd. WTI also sets fresh day-high, rising as much as 3.4% to $49.45, and also set to rise above its 50-day MA at $49.49.

"While this announcement should allay some concerns in the market and lead to a short-covering rally, given the current bearish tint to sentiment, there is no guarantee of a sustained rally," said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London.

Meanwhile the elephant in the room, global oil demand, continues to decline, and there is no amount of OPEC jawboning that can do anything about that.

The crude gains offered some respite after what’s been a miserable few weeks for many commodities, amid Trump’s struggle to get his infrastructure plan underway and tightening credit in China futures market quotes. Meanwhile, investors are sifting various macro events in a bid to gauge the strength of the global economy nyse futures exchange. During the weekend and overnight, China’s President Xi Jinping laid out a sweeping framework for Chinese-style globalization before data showed the country’s factory output and investment slowed in April stock market definitions glossary. Numbers on American retail sales and inflation also cast a shadow on growth.

At a time when central bank policymakers are wondering if they have successfully got consumer prices moving upward again, oil has been rising steadily for two weeks and may again start to boost headline rates of inflation in the months ahead.

Looking at global stock markets, Asian stock markets shrugged off worries over the ‘ransomware’ cyber attack to reach a two-year high today’s exchange rate of usd to inr. Hong Kong shares gained 0.9 percent and their mainland equivalents 0.4 percent, after Beijing soothed market fears of tighter regulation saying bank risks were "completely controllable." China shares trading in Hong Kong rallied to the highest level since March, as President Xi Jinping’s plans for an international infrastructure program overshadowed data showing slower growth in factory output and investment 1 jpy to usd. Tokyo shares almost erased earlier losses as the yen weakened and investors assessed a wave of corporate earnings.

The Stoxx Europe 600 was slighlty in the red London, after touching the highest level since August 2015 last week currency converter rs to usd. A blowout victory for Angela Merkel’s conservatives in a regional election in Germany’s most populous state also helped share indices in London, Frankfurt and Madrid inch higher in early trade.

S&P 500 futures were little changed, up less than 0.1%, after cash equities dropped 0.4% last week, posting their first back-to-back drop since mid-April as investors awaited earnings reports this week.

"The shadow of Friday’s softer U.S. CPI and retail sales data hangs over markets this morning," Societe Generale analyst Kit Juckes said in a note to clients. "The inability of the dollar to gain more … reflects the changing global landscape as recovery elsewhere drives rates and yields a bit higher. With a thin U.S. data calendar, there’s not much to propel yields or the dollar back up."

The shadow of Friday’s softer US CPI and retail sales data hangs over markets this morning with 10-year Treasuries at 2.33%. 10year TIIPS are at 47bp and have now recorded three peaks since November at 0.7%, 0.6% and 0.5%. The corresponding levels for DXY are 103.2, 102.2 and 99.7. The inability of the dollar to gain more from that last move up in yields reflects the changing global landscape as recovery elsewhere drives rates and yields a bit higher convert binary. With a thin US data calendar (highlight housing starts and industrial production tomorrow), there’s not much to propel yields or the dollar back up. That December DXY high looks pretty safe. There’s a good chance that we see EUR/USD break 1.10 again this week.

Tyler Durden (pseudonym) is the lead writer at ZeroHedge. Tyler represents the idea that a return to truly efficient markets is a possibility and a necessity.

After having experienced the inner workings of capitalism at various asset managers and advisors, Tyler believes that the current model is flawed. He argues that a deleveraging at every level of modern society is needed to reinspire the fundamental entrepreneurial spirit. less