Oil steadies in wake of output resolve from Opec

Oil prices have steadied after the cartel of major exporters and their allies reiterated plans to stick to targets to cut production, rather than increase output to make up for any shortfall from Russian supplies.

Brent crude, the international benchmark, added 0.2 per cent on Tuesday to trade at $87.66. West Texas Intermediate, the US marker, rose 0.01 per cent at $80.07. 

Prices for each benchmark fell by as much as 6 per cent on Monday after the Wall Street Journal reported that the Opec group of oil-producing countries might increase supply by up to 500,000 barrels a day. Such a move would have alleviated a potential shortfall once an EU embargo on Russian oil shipments comes into effect in early December.

Oil prices rebounded later in the day, however, after Saudi Arabia reiterated that the Opec+ group, which includes the cartel and allies such as Russia, would stick to its October decision to cut production targets by 2mn barrels a day.

In equity markets, the regional Stoxx Europe 600 added 0.2 per cent in early trading and London’s FTSE gained 0.6 per cent. Contracts tracking Wall Street’s S&P 500 and the tech-heavy Nasdaq 100 fell 0.1 per cent ahead of the New York open.

Hong Kong’s Hang Seng index fell 1.2 per cent, while China’s CSI 300 was flat, Japan’s Topix rose 1.2 per cent and South Korea’s Kospi shed 0.6 per cent.

US equities fell in the previous session as rising cases of Covid-19 in China weighed on hopes that the world’s second-biggest economy might be about to relax its strict virus control measures.

China’s zero-Covid stance has “suddenly returned as a very central driver for global markets” and was helping to fuel “a return to the dollar”, said Francesco Pesole, FX strategist at ING.

The dollar has inched 1 per cent higher against a basket of six other currencies over the past week, trimming its decline for November to 3.6 per cent.

“Optimism on China’s outlook was one of the two key forces, along with speculation about a dovish pivot by the [US Federal Reserve], behind the sharp dollar correction earlier this month,” Pesole added.

The Fed’s James Bullard last week stressed that interest rates could yet rise above 5 per cent as the central bank seeks to tame accelerating inflation.

In government bond markets, the two-year Treasury yield, which is particularly sensitive to interest-rate expectations, fell 0.02 percentage points to 4.5 per cent. The benchmark 10-year Treasury yield slipped 0.02 percentage points to 3.8 per cent. Yields fall as prices rise.

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