Oil Moves Higher as Brent Crude Tops $60 a Barrel

By Alison Sider and Christopher Alessi Features Dow Jones Newswires

Oil prices pressed higher Friday morning, with Brent crude topping the elusive $60-a-barrel mark for the first time in more than two years.

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Brent, the global benchmark, recently traded up 71 cents, or 1.2%, at $60.01 a barrel on ICE Futures Europe. U.S. crude futures traded up 81 cents, or 1.54%, at $53.45 a barrel on the New York Mercantile Exchange.

"There's a lot of emotional momentum building," said Donald Morton, senior vice president at Herbert J. Sims & Co., who oversees an energy-trading desk. The $60 price is "a big bull's-eye" that oil producers and bullish investors have been eyeing all year.

Brent hit a two-year high Thursday, settling at $59.30 a barrel, helped by declining inventories of fuel and optimism that the Organization of the Petroleum Exporting Countries will likely extend a deal to limit production and rein in global oversupply.

Analysts and market participants said Friday's move higher was fueled by technical factors, with more traders piling in as prices rose. But the fundamental outlook has also shifted, with stockpiles falling and questions about the growth rate of U.S. shale output also fueling gains.

"It's been a slow train coming," said Mark Benigno, co-director of energy trading at INTL FCStone, but investors have come around to the idea that OPEC's efforts are paying off. "It's happening the way they were hoping it would," Mr. Benigno said.

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Some expect oil to encounter staunch resistance on its march higher. Producers are likely to take advantage of the rally to hedge, or lock in higher prices for output next year.

"It can't really go above $60" a barrel, Giovanni Staunovo, a commodity analyst at UBS Wealth Management, said of the price of Brent. "If it goes too high, it's an indication to U.S. shale producers to produce more oil," a development that could undermine the oil market rebalancing under way, he said.

Mr. Staunovo said UBS expects the price of Brent to stay in a range of $55 to $60 a barrel.

"There is certainly no general consensus on whether this psychological threshold [$60 a barrel], which was last seen in July 2015, will be overcome in the near-term," Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd., wrote in a note Friday.

Mr. Brennock said the "ingredients are there" for Brent to move higher but that "sustaining it will be a herculean challenge."

Prices have been supported this week by data showing declining commercial petroleum stocks in the U.S. and news that Saudi Arabia and Russia -- the world's two largest crude producers -- want to extend the agreement to curb output after the deal expires in March 2018, likely through the end of next year.

OPEC and some major producers outside the cartel, including Russia, first agreed late last year to cap their production at around 1.8 million barrels a day lower than peak October 2016 levels, with the aim of alleviating global oversupply and boosting prices.

OPEC and Russia are set to formally discuss an extension of the deal at the cartel's next official meeting in Vienna on Nov. 30.

Meanwhile, analysts and investors are looking ahead to monthly U.S. supply and demand data, out on Tuesday.

Gasoline futures rose 0.59 cent, or 0.34%, to $1.7565 a gallon. Diesel futures rose 2.11 cents, or 1.15%, to $1.8630 a gallon.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

Oil prices pressed higher Friday, with Brent crude topping the elusive $60-a-barrel mark for the first time in more than two years amid hopes that OPEC will continue curbing output.

Brent, the global benchmark, rose $1.14, or 1.92%, to $60.44 -- its highest settlement value since July 2, 2015. U.S. crude futures rose $1.26, or 2.39%, to $53.90 a barrel -- an eight-month high.

The $60 threshold is one that oil producing nations and bullish investors have been eyeing all year. They've often been frustrated: despite production cuts by the Organization of the Petroleum Exporting Countries and other major exporters, rallies have been fleeting.

But the outlook has shifted in recent weeks, with oil prices posting weekly gains three weeks in a row. Brent prices rose 4.66% this week and West Texas Intermediate, the U.S. benchmark, rose 3.97%.

"It's been a slow train coming," said Mark Benigno, co-director of energy trading at INTL FCStone, but investors have come around to the idea that OPEC's efforts are paying off. "People wrote off the story like, 'forget OPEC.' But it's happening the way they were hoping it would," Mr. Benigno said.

Crude and fuel stockpiles have declined steadily, and demand is growing. Saudi Arabia and Russia have thrown their support behind extending production cuts through the end of 2018. Near-term Brent prices are higher than prices for oil delivered in future months, a market structure that indicates tighter supplies available for immediate delivery.

"That's telling me this is happening -- this is working," said Michael Hiley, a trader at LPS Futures LLC. "The underlying fundamentals keep nudging us higher."

Rising geopolitical risk has also boosted oil prices lately. Clashes between Iraqi government troops and forces from the semiautonomous Kurdish region disrupted some oil production and exports this month.

Some expect oil to encounter staunch resistance on its march higher. U.S. oil producers are likely to take advantage of the rally to hedge, or lock in higher prices for output next year.

"It can't really go above $60" a barrel, Giovanni Staunovo, a commodity analyst at UBS Wealth Management, said of the price of Brent. "If it goes too high, it is an indication to U.S. shale producers to produce more oil," a development that could undermine the oil market rebalancing under way, he said.

Mr. Staunovo said UBS expects the price of Brent to stay in a range of $55 to $60 a barrel.

OPEC and some major producers outside the cartel, including Russia, first agreed late last year to cap their production at around 1.8 million barrels a day lower than peak October 2016 levels, with the aim of alleviating global oversupply and boosting prices. The deal has already been extended through March 2018, but many market participants are now anticipating that it will be pushed even further out, something Saudi Arabia and Russia -- the world's two largest crude producers, favor, people familiar with the matter said earlier this week.

OPEC and Russia are set to formally discuss an extension of the deal at the cartel's next official meeting in Vienna on Nov. 30.

Gasoline futures rose 1.8 cents, or 1.03%, to $1.7686 a gallon. Diesel futures rose 2.5 cents, or 1.36%, to $1.8669 a gallon -- its highest settle value since June 30, 2015.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

October 27, 2017 16:41 ET (20:41 GMT)