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Oil stabilizes after OPEC reiterated plan to maintain production cut targets

by SuperiorInvest

Oil prices steadied after a cartel of major exporters and their allies reiterated plans to stick to targets to cut output rather than increase production to offset any shortfall in Russian supplies.

Brent crude, the international benchmark, added 1.4 percent to trade at $88.64 on Tuesday. West Texas Intermediate, the U.S. benchmark, also rose 1.4 percent to $81.14.

The market was volatile in the previous session after oil-producing group OPEC denied a Wall Street Journal report that the group could increase supply by as much as 500,000 barrels a day. Such a move would ease a potential shortfall once the EU embargo on Russian oil supplies takes effect in early December.

But it said it would stick to its October decision to cut production targets by 2 million b/d.

In the stock markets, London’s FTSE 100 rose 0.6 percent, boosted by gains in oil and gas majors such as BP and Shell, up 6 percent and 3.5 percent, respectively. The regional Stoxx Europe 600 added 0.3 percent.

Contracts tracking Wall Street’s S&P 500 and the tech-heavy Nasdaq 100 traded flat.

Hong Kong’s Hang Seng fell 1.3 percent, while China’s CSI 300 ended unchanged. Japan’s Topix rose 1.1 percent and South Korea’s Kospi lost 0.8 percent.

U.S. stocks fell in the previous session as a rising number of Covid-19 cases in China weighed on hopes that the world’s second-largest economy may be about to ease virus-control measures.

China’s zero-Covid stance has “suddenly returned as a very central driver for global markets” and helped fuel a “return to the dollar”, said Francesco Pesole, FX strategist at ING.

The dollar gained 1 percent against a basket of six other currencies in the past week, paring its November decline to 3.6 percent.

“Optimism about China’s outlook was one of two key forces, along with speculation about a dovish pivot from [US Federal Reserve]behind the sharp dollar correction earlier this month,” Pesole added.

St Louis Fed President James Bullard stressed last week that interest rates could rise further above 5 percent as the central bank tries to tame accelerating inflation.

In the government bond markets, they are two-year treasury the yield, which is particularly sensitive to interest rate expectations, fell 0.02 percentage point to 4.5 percent. The benchmark 10-year government bond yield fell by 0.03 percentage point to 3.79 percent. Revenues fall as prices rise.

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