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Business News/ Market / Stock-market-news/  Oil surges above $50 amid biggest weekly gain since August
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Oil surges above $50 amid biggest weekly gain since August

Crude traded above $50 a barrel on Thursday for the first time since July on signs that expanding demand will trim the surplus that pulled down prices

Brent for November settlement gained as much as 95 cents, or 1.8%, to $54 a barrel on the London-based ICE Futures Europe exchange. It has increased 12% this week, the most since March 2009. Photo: BloombergPremium
Brent for November settlement gained as much as 95 cents, or 1.8%, to $54 a barrel on the London-based ICE Futures Europe exchange. It has increased 12% this week, the most since March 2009. Photo: Bloomberg

Melbourne: Oil rose above $50 a barrel for a second day and headed for the biggest weekly gain since August amid speculation an increase in demand will ease a global glut.

Futures climbed as much as 2.3% in New York amid a rally in equity markets and are up 11% this week. A “new capital discipline" in the industry will allow consumption to catch up with supply, according to Gary Ross, the founder and chairman of PIRA Energy Group. Oil will advance over the next 12 months as the worst of the collapse in commodities prices is probably over, predicted Pacific Investment Management Co., which manages $15 billion in commodity assets.

Crude traded above $50 a barrel on Thursday for the first time since July on signs expanding demand will trim the surplus that drove prices to the lowest level in six years. Federal Reserve minutes indicated policymakers won’t rush to lift interest rates, sending the dollar lower and making commodities priced in the US currency more attractive.

“West Texas is approaching a key resistance level at $50 and sustained trading over that point would be a very positive development for oil," Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “We’ve had a period of basing behavior that suggests prices have seen the bottom."

West Texas Intermediate (WTI) for November delivery rose as much as $1.15 to $50.58 a barrel on the New York Mercantile Exchange and was at $50.49 at 4:41pm Sydney time. The contract added $1.62 to $49.43 on Thursday. The volume of all futures traded was about 74% above the 100-day average.

Global demand

Brent for November settlement gained as much as 95 cents, or 1.8%, to $54 a barrel on the London-based ICE Futures Europe exchange. It has increased 12% this week, the most since March 2009. The European benchmark crude traded at a premium of $3.41 to WTI.

A key driver for rising oil prices will be the lack of spare production capacity, according to Ross, who predicted last year’s rout before turning bullish in 2015. It will take the US shale industry at least nine months to boost output after crude climbs to more profitable levels, he said at a PIRA seminar in New York on Thursday.

Global demand will expand by 1.5 million barrels a day this year, more than previously forecast, Abdalla Salem El-Badri, the secretary-general of the Organization of Petroleum Exporting Countries, said in a statement to an International Monetary Fund committee this week. The market has a supply overhang of about 200 million barrels, he told an industry conference separately in London.

Sixteen of 41 traders and analysts were bullish on WTI in a Bloomberg survey on Thursday. Eleven were bearish while 14 were neutral. Bloomberg

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Published: 09 Oct 2015, 11:30 AM IST
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