OPEC Close to Production Cut Agreement

Crude oil prices are trading higher on Monday as investors react to the weaker U.S. Dollar and reports that OPEC may be moving closer to a preliminary agreement to curb production when it meets on November 30 in Vienna.

At the U.S. mid-session, January West Texas Intermediate Crude Oil is trading $47.92, up $1.56 or +3.36%. Internationally traded February Brent Crude Oil is at $49.59, up $1.62 or +3.38%.

The WTI contract is looking particularly well on the daily chart. The trend changed to up and the market is trading above a key 50% level at $47.85. If it can sustain this rally then the next target is $49.00.

Helping to boost demand for oil was the lower U.S. Dollar. Traders took a breather after last week’s spectacular gains and ahead of this week’s U.S. bank holiday on Thursday.

Today’s price action suggests that investors believe OPEC is close to reaching a deal with its members to cut output. The news was supported by comments from Russian Vladimir Putin who said he saw no obstacle to non-OPEC member Russia agreeing to freeze oil output, which at 11 million barrels per day is at a post-Soviet high.

One of the biggest hurdles to overcome has been getting Iran to agree to production cuts. However, a compromise may be in the works that allows Iran the chance to cap, rather than cut, output.

U.S. Equity Markets

The S&P 500 Index hit a new all-time high on Monday, driven by oil stocks which rose more than 2%. The energy sector led all sectors higher. The Dow Jones Industrial Average was up about 50 points, driven by Chevron, an oil-related company. The NASDAQ Composite also pushed into a new all-time high.

After a sluggish performance last week, stocks are trading better today, led by higher commodity prices which are being driven by the weaker U.S. Dollar.

Stocks may have been helped a little by remarks from Federal Reserve Stanley Fischer who make comments about how fiscal policy can help boost productivity and, in turn, lower the burden of supporting the economy on the central bank.

U.S. Dollar and Forex

There were no major U.S. economic reports today which may have given December U.S. Dollar investors an excuse to book profits. Thin trading conditions also helped boost currencies that have been beat up lately including the Euro, Australian Dollar and Japanese Yen.

Gold

Gold received a boost from increased demand related to the weaker U.S. Dollar. The price action suggests that the expected Fed rate hike in December has been fully-priced into the market.