Crude prices jumped more than four per cent yesterday after the US cut output forecasts, while global equity markets mostly rose on expectations the Federal Reserve will not raise interest rates this year.
Helping crude was news that Russia and Saudi Arabia had met last week and discussed the oil market, and planned to continue exchanging views on demand, production and shale oil, Russian Energy Minister Alexander Novak told reporters.
A weakening dollar added support for oil, while the US Energy Information Administration projected in its monthly forecast that the country’s crude output will fall through mid-2016.
“The market is possibly moving on speculation that Opec and non-Opec countries will find an agreement to cooperate,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Brent, the global benchmark for crude, rose $2.50 to $51.75 a barrel. West Texas Intermediate, the US crude benchmark, rose $2.13 to $48.41.
European shares moved higher, extending strong gains from the previous session, with expectations the US and European central banks will maintain equity-friendly monetary policy in the coming months.
Large volume in the US stock market’s rally on Monday suggests that at least the downside momentum is now broken, said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. in Sarasota, Florida.
“The markets are playing off the fact that there’s a strong likelihood the market has now made a bottom, and we at some point will begin a year-end rally,” Bittles said.
The pan-European FTSEurofirst 300 closed up a preliminary 0.75 per cent, while MSCI’s all-country world stock index rose 0.19 per cent, aided by a one per cent gain in Tokyo.
An 11 per cent surge in DuPont, after CEO Ellen Kullman said she would step down, helped the Dow inch higher.
The Dow Jones industrial average rose 5.54 points, or 0.03 per cent, to 16,781.97. The S&P 500 fell 9.38 points, or 0.47 per cent, to 1,977.67 and the Nasdaq Composite is lost 51.80 points, or 1.08 per cent, to 4,729.46.
The US dollar slipped against major currencies on continued expectations the Fed will not hike rates this year for the first time in almost a decade.
Commerce Department data showing the largest expansion in the US trade deficit in five months in August reinforced expectations the Fed would delay hiking rates until next year. A weak US jobs report on Friday has also driven such expectations.
“People are still very sceptical about the Fed raising rates this year,” said Thierry Albert Wizman, interest rates and currency strategist at Macquarie Ltd in New York.
The dollar was last down 0.21 per cent against the yen at 120.20 yen. The euro was last up 0.72 per cent against the dollar at $1.1265.
US Treasuries prices also gained on the increase in the US trade deficit, which reinforced the view of slowing global demand.
Benchmark 10-year Treasuries notes were up 1/32 in price to yield 2.0527 per cent.