Resource stocks rally as oil surges, bonds suffer

Resource stocks rally as oil surges, bonds suffer

Oil began a slide from above $100 - a price that Saudi Arabia endorsed in 2012 - in mid-2014, when growing supply from rival sources such as US shale began to swamp the market.

Reuters reported on Wednesday that top oil exporter Saudi Arabia would be happy to see crude rise to United States dollars 80 or even USD 100 a barrel, which was seen as a sign that Riyadh will seek no changes to an OPEC supply-cutting deal that was introduced in 2017 to boost prices.

It was set to be the strongest day for the commodity complex in eight months as Brent crude futures climbed past $74 a barrel after a near 3 per cent jump overnight.

USA benchmark West Texas Intermediate (WTI) crude rose as high as $68.91 per barrel for a daily gain of 3.6 percent and reached its highest level since December 2, 2014.

The price of Brent, the worldwide benchmark for light sweet crude, topped $74 per barrel, the highest since late 2014 on Thursday, as a mix of geopolitical tensions in the Middle East, and supply disruptions in Venezuela spurred its rally.

Crude futures were already higher ahead of the release after the American Petroleum Institute reported a 1-million-barrels drop on Tuesday afternoon.

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Once the Aramco share sale is done, Riyadh would still want higher prices to help fund initiatives such as Vision 2030, an economic reform plan championed by Crown Prince Mohammed bin Salman.

The leap in oil combined with fears that sanctions on Russian Federation could hit supplies of other commodities to light a fire under the entire sector.

The main focus today is on oil prices, which, since late 2014, have continued to rise to new heights. "They need higher prices". While futures in London have broken past the 50 percent Fibonacci retracement of the slump from when they were above $100 in mid-2014, another signal shows the rally could persist to the line just under $82. The shale oil sector's resilience is thanks to technological advances and lower production costs that not only has set OPEC on its heels but could soon dethrone Russian Federation as the world's largest oil producer. Distillate inventories were also down, by 3.1 million barrels, after a weekly draw of 1 million barrels in the prior seven-day period. The oil industry has to be a "little bit careful" wishing for higher prices, because the key characteristic of the market now is volatility, Total's CEO said.

"US production is too responsive to high price and there is still plenty of crude oil in tanks", he said.

The ministers are expected to discuss the five-year average inventory metric on Friday, though the JTC has made no recommendations on this, the sources said.