Brent crude traded above $80 a barrel after China, the world’s second-largest oil consumer, cut interest rates for the first time since 2012 to bolster its economy. West Texas Intermediate also rose in New York.
Futures gained as much as 2.3% in London. The People’s Bank of China cut lending and deposit rates effective from tomorrow, according to a statement.
Half of the 20 analysts surveyed predict the Organization of Petroleum Exporting Countries will reduce output, while the rest expect no change, when the group meets next week.
“After a lot of recent bearish news we received fairly optimistic news from China with its interest rate cut,” Myrto Sokou, senior analyst at London-based Sucden Financial Ltd., said by e-mail. “However, I believe we are going to experience high volatility and more downside pressure in the oil market ahead of the OPEC meeting.”
Brent for January settlement increased as much as $1.81 to $81.14 a barrel on the London-based ICE Futures Europe exchange, the highest since November 12. It was at $81 as of 11:45 a.m. local time. The volume of all futures traded was about 21% above the 100-day average for the time of day.
WTI for January delivery climbed as much as $1.55, or 2%, to $77.40 a barrel in electronic trading on the New York Mercantile Exchange. The December contract expired yesterday after rising $1 to $75.58.
The European benchmark crude traded at a $3.76 premium to WTI, compared with $3.59 on November 14.
The People’s Bank of China cut its one-year benchmark lending rate by 0.4 percentage points to 5.6 percent, while the deposit rate fell 0.25 percentage points to 2.75%.
Saudi Arabia, OPEC’s biggest producer, may be shifting its focus to defend market share, according to Bank of America Corp.
The kingdom may prefer lower and more volatile oil prices to discourage investment in North American shale output, it said in a note yesterday, projecting that OPEC may trim its collective target by no more than 500,000 barrels a day.