Oil climbs on hopes for output cut, dollar slips
NEW YORK, January 29, 2016
Crude oil prices rose to their highest in three weeks on hopes for a pact among oil producers to cut output, while the dollar slipped on bets that interest rate hikes by the Federal Reserve would be more gradual than it has suggested.
The rebound in the oil market lifted share prices on Wall Street and other stock markets in another rollercoaster session. European stocks fell on disappointing earnings reports.
The persistent volatility in US and European equity markets underpinned demand for US and German government bonds.
However, gold, normally considered a safer asset in times of turbulence, retreated from 12-week highs.
"Once the oil market establishes stability, it would be good for the global economy," said Ron D'Vari, chief executive at NewOak Capital in New York.
Russian energy minister Alexander Novak and a senior Gulf Opec delegate suggested that major oil producers may pare production in an effort to ease a global supply glut that has hammered oil prices over the past year and a half.
It remained unclear whether a deal to cut production by up to five per cent would be struck anytime soon.
Benchmark Brent futures jumped as much as eight per cent to nearly $36 a barrel before ending up 79 cents or 2.39 per cent at $33.89 a barrel. US crude rose 92 cents, or 2.85 per cent, at $33.22 per barrel.
Tumbling energy prices, stemming from worries about weakening demand from world no two economy China, have roiled financial markets. This was a concern the Fed cited as a factor for keeping its key policy rate at 0.25-0.50 per cent on Wednesday.
SLOWER PATH FOR RATE HIKES?
The Fed's worry over global and financial developments spurred selling in the dollar against most major currencies as traders reckoned US policymakers would ease back on plans for four possible quarter-point rate hikes for 2016 that they had signaled at their December policy meeting.
The dollar index, which gauges the greenback against the euro, yen and four other currencies, was last down 0.3 per cent at 98.576.
The possibility of a slower path for US rate hikes was seen as less welcome by stock market participants. Some had hoped the Fed might put the brakes on raising rates altogether.
Wall Street swung wildly Thursday before settling in positive territory, helped by blockbuster quarterly results from Facebook.
The Dow Jones industrial average rose 125.18 points, or 0.79 per cent, to 16,069.64, the S&P 500 gained 10.41 points, or 0.55 per cent, to 1,893.36 and the Nasdaq Composite added 38.51 points, or 0.86 percent, to 4,506.68.
Europe's Eurofirst 300 index of top shares fell 1.68 per cent, to 1,319.229 due to disappointing results from Roche and Novartis and worries about bad bank loans.
The MSCI world equity index, which tracks shares in 45 nations, gained 0.2 per cent.
In the bond market, the yield on benchmark 10-year Treasury notes edged down one basis point to 1.992 per cent, while 10-year German Bunds were yielding 0.408 per cent, down four basis points.
Spot gold prices fell $9.38 or 0.83 per cent, to $1,115.81 an ounce. - Reuters
