Economy

Crude Prices Extend Rally

Crude Prices Extend Rally”

Crude oil futures jumped to their highest in two years Friday amid supply interruptions in North America and expectations that OPEC will extend its output cuts through 2018. Implied volatility of options on second-month West Texas Intermediate futures sank to 20.94 percent Friday, the lowest level since October 2014, according to data compiled by Bloomberg.

At 0804 GMT, January WTI crude oil is trading $58.61, up $0.05 or +0.09% and February Brent crude oil is at $63.34, up $0.09 or +0.14%.

PVM Oil Associates strategist, Tamas Varga, said the oil spill that shut the Keystone pipeline was supporting U.S. crude, flipping prices into backwardation, when front-month prices rise above those for future months, indicating an undersupplied market.

The pipeline, owned and operated by TransCanada Corporation, runs crude oil from the Canadian sedimentary basin to refineries in IL and Texas and ruptured last week, spilling 200,000 gallons of crude in South Dakota.

The deal to curb output is due to expire in March 2018, but OPEC will meet on November 30 to discuss the outlook for the policy.

"With the majority of OPEC members endorsing an extension, Russian support is the key risk", Jon Rigby, head of oil research at UBS, wrote in a note. The event has driven up US crude as stockpiles at the storage hub of Cushing, Oklahoma, have declined.

Markets have also tightened globally due to output cuts since January by the Organization of the Petroleum Exporting Countries, Russia and several other producers.

The oil market fundamentals may be improving, however, some traders still feel that gains are being limited by rising US production.



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