Oil was little changed, adding to a second monthly gain, after OPEC agreed to its first production cut in eight years on Wednesday.
Futures erased declines in New York as the dollar retreated, bolstering investor demand for commodities. Prices are up 7.3 percent for the month, heading for the first September increase since 2010. Oil surged the most in more than five months after the announcement of the deal, which will see the Organization of Petroleum Exporting Countries reduce production to a range of 32.5 million to 33 million barrels a day.
“This has been a momentous week,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund focused on energy. “OPEC has gotten some reward for this nascent effort at coming together.”
The agreement caught the market by surprise after prior signals from Saudi Arabia and Iran that an accord was unlikely. OPEC now faces the challenge of implementing the cuts, with Goldman Sachs Group Inc. and Morgan Stanley expressing skepticism that the deal can be completed. Nigeria, Iran and Libya have said they are exempt from an agreement, while Iraq has said it doesn’t accept OPEC’s estimates of its production levels.
West Texas Intermediate for November delivery rose 13 cents to $47.96 a barrel at 9:38 a.m. on the New York Mercantile Exchange. The contract rose 78 cents to $47.83 on Thursday, capping a 7 percent advance over two days. Total volume traded was in line with the 100-day average. Prices are down 0.8 percent for the quarter.
Brent for November settlement, which expires Friday, dropped 31 cents, or 0.6 percent, to $48.93 a barrel on the London-based ICE Futures Europe exchange. Prices are up 4 percent this month and down 1.5 percent for the quarter. The global benchmark crude was at a 97 cent premium to WTI. The more-active December contract slipped 9 cents to $49.72.
For a story on how the OPEC output deal was completed, click here.
Oil will need to hold above $50 a barrel for months before U.S. companies commit to more spending, according to analysts at firms including S&P Global Platts and Oppenheimer & Co. The number of rigs targeting oil in the U.S. climbed to 418 in the week ended Sept. 23, the highest level since February, according to data from Baker Hughes Inc.
OPEC’s planned output cuts will need at least six months to have an effect on the oil market, according to Bank of America Merrill Lynch. The agreement represented a “capitulation” to U.S. shale drillers, according to Warwick Energy Group, a closely held investor in thousands of oil wells. Brazil’s main oil union FUP has rejected Petrobras Brasileiro S.A.’s most recent salary proposal, and representatives will meet with management to demand a new offer, the union said on its website.