Oil prices extended their recovery for a second session on Wednesday while gold traded in a narrow range above the $820 level but base metals saw renewed weakness.
Oil prices have found support this week from colder weather in the US and comments from Saudi Arabia which suggested that it was prepared to reduce production beyond previously announced supply cuts if the market warranted further action.
Saudi Arabia’s oil minister who was quoted as saying: “we will do what it takes to bring it back into balance’’.
The Saudi comments provided support for the view that Opec could cut production further at the cartel’s next meeting which is scheduled for March.
Dealers said talk was already surfacing that if oil prices were to dip below the $30 a barrel level, Opec would call for an emergency meeting.
Nymex February West Texas Intermediate rose $1 to $38.78 a barrel, trading between a low of $38.48 and a high of $39.45.
The March WTI contract traded 43 cents higher at $45.20.
Oil traders say that the February WTI contract, which is due to expire on Tuesday, appears to have “disconnected” from the rest of the forward prices curve.
There could be further downward pressure on the February contract following the release of the latest US weekly inventories data, due out later in the session.
US crude stocks were expected to rise 2.2m barrels while gasoline inventories were seen increasing 1.6m barrels and distillate stocks (including heating oil) were forecast to rise 1.1m barrels.
ICE February Brent added 71 cents at $45.54 a barrel. The spread between Brent and WTI has reached record levels. Brent, the European crude benchmark, has been bolstered by the loss of Russia’s natural gas supplies to much of Europe in the middle of winter while WTI has been undermined by concerns that oil companies could deliver large amounts of crude from offshore tankers to the US mainland.
Dealers say that the narrowing in the price spreads between Brent and Dubai, the Middle East benchmark, shows that previous Opec supply cuts have started to tighten the market. However, it will take several weeks before tanker tracking data fully registered the production cuts by Opec’s members.
Gold traded at $825 a troy ounce, rangebound in a narrow band between a low of $820.90 and a high of $828.65, after ending trading in New York on Tuesday at $821.10.
