SEOUL (BLOOMBERG) - Oil rebounded from the biggest monthly loss in a decade on Monday (Dec 3) after Russia and Saudi Arabia agreed to extend their deal to manage the oil market into 2019 while a trade truce between the US and China sparked a renewed appetite for riskier assets.
Brent rose as much as 2.3 per cent in London, after the front-month contract plunged more than 20 per cent last month. Russian President Vladimir Putin announced the extension after a meeting on Saturday on the sidelines of the Group of 20 with Saudi Arabian Crown Prince Mohammed bin Salman, though Moscow and Riyadh have yet to confirm any fresh output cuts. Risk assets including oil also gained after the US and China agreed to pause the introduction of new tariffs, easing concerns their trade war is damaging global growth.
Crude collapsed into a bear market last month on fears over a supply glut after America granted waivers to some nations to keep importing Iranian oil. Traders have been watching closely if the Organization of Petroleum Exporting Countries and its partners will curb output at their meeting this week in Vienna to stabilize prices. While Opec delegates said the leaders have given their political blessing for an agreement, plenty of work is left, including on the size of any potential output cut.
"While we still need to know by how much Opec will curb its production, Putin's comment does clear a barrier for Opec in stabilizing prices as Russia has been ambiguous about its stance," Ahn Yea Ha, a commodities analyst at Kiwoom Securities Co., said by phone from Seoul. "At the same time, oil's being supported by easing trade tensions between the US and China as it's improving investor sentiment for risk assets."
Brent for February settlement gained as much as US$1.40 to US$60.86 a barrel on London's ICE Futures Europe exchange, and traded at US$60.84 at 9:02am. in Seoul. The global benchmark crude traded at an US$8.36 premium to West Texas Intermediate for the same month. The January contract expired on Friday after declining 1.3 per cent.
WTI for January delivery climbed as much as US$1.62, or 3.2 per cent, to US$52.55 a barrel on the New York Mercantile Exchange. The contract lost 22 per cent last month. Total volume traded was more than double the 100-day average.
On Sunday, Opec's president, UAE. Energy Minister Suhail Al Mazrouei, said he was optimistic Opec+ will reach an agreement over a cut in production for 2019 when they meet in Vienna. Technical teams are working on the level of the cuts necessary and the reference baseline for the reduction, he said.
"This might be the critical breakthrough for Opec and non-Opec to cut," said Derek Brower, a director at consultant RS Energy Group. "But the details are now what matter -- how much will be cut, from when, for how long and, crucially, from what baselines."