NEW YORK: Global oil prices rallied on Friday (Nov 21) on China’s surprise interest rate cuts and somewhat higher expectations that OPEC could decide to reduce production next week.
US benchmark West Texas Intermediate for January delivery gained 66 cents to US$76.51 a barrel on the New York Mercantile Exchange.
European benchmark Brent oil for January delivery rose US$1.03 to US$80.36 a barrel in London.
The People’s Bank of China unexpectedly cut benchmark interest rates for the first time in more than two years to boost sagging economic growth. The move helped spur gains in crude, copper and some other commodities as traders bet on increased demand from the world’s second largest economy.
Analysts also were encouraged by comments from European Central Bank President Mario Draghi that the bank is ready to immediately expand stimulus efforts to return the eurozone to its inflation objective.
Andy Lipow, head of Houston consultancy Lipow Oil Associates, said traders were increasingly focused on the possibility that the Nov 27 meeting of the Organization of Petroleum Exporting Countries could result in a reduction in output.
“As we get closer to the OPEC meeting, we are hearing more and more comments regarding the need for production cuts,” Lipow said. Crude investors “are less willing to sell until they see the OPEC meeting outcome.”
Commerzbank rated the chance of an OPEC quota cut as “unlikely,” but said the group might decide to hold itself to producing at the current quota of 30 million barrels per day. OPEC is currently pumping closer to 31 million barrels a day, according to analysts.