Oil extended gains following its steepest one-day surge since April after OPEC agreed to a preliminary deal that will cut crude production for the first time in eight years. Most Asian index futures signaled advances, along with forwards on the Malaysian ringgit.
U.S. crude continued to climb above $47 a barrel after its 5.3 percent jump Wednesday spurred gains in American energy stocks and commodity-linked currencies. Copper futures also advanced, while Australian government debt tracked declines in Treasuries amid concern an increase in the value of oil could stoke inflation. Futures on equity gauges in Japan, Australia and South Korea rose the Canadian dollar strengthened further. One-month non-deliverable ringgit forwards jumped 0.7 percent with the yen pulling back.
Markets were taken aback by initial reports of the oil-output deal, with Saudi Arabia and Iran wrong-footing traders who had expected a continuation of the pump-at-will policy the Organization of Petroleum Exporting Countries adopted in 2014. OPEC agreed to trim production to a range of 32.5 million to 33 million barrels per day following an informal meeting in Algiers. Many of the details are still to be worked out and the group won’t decide on targets for each member country until its next gathering at the end of November. Concern over a global glut has weighed on crude prices for at least the past two years.
“The energy sector is going to be a key contributor to the rally we see after the OPEC decision,” Tony Farnham, a strategist at Patersons Securities Ltd. in Sydney, said by phone. “All we’ve seen at this stage is the intention to do something, I’d like to see it more concrete and then still they have to abide by it. But, it is the first step.”
For more the proposed deal, see our live blog from Algiers here.
Taiwan has a monetary policy review Thursday, with economists predicting interest rates will be left on hold, as markets there resume following a typhoon. Japan reports on retail sales and trade, while Australia updates on job vacancies. Vietnam releases a slew of data, including trade, retail sales and a reading on third-quarter gross domestic product.
West Texas Intermediate crude for November delivery gained 0.2 percent to $47.12 a barrel as of 8:45 a.m. Tokyo time. Brent oil for November settlement surged 5.9 percent Wednesday to $48.69 on the London-based ICE Futures Europe exchange. The global benchmark closed at a $1.64 premium to WTI.
“The cut is clearly bullish,” Mike Wittner, head of oil-market research at Societe Generale SA in New York, said by phone. “The number of actual barrels that will be taken off the market is unclear. What’s much more important is that the Saudis appear to be returning to a period of market management.”
While some members of OPEC will have to reduce output, Iran won’t have to freeze production, said the country’s oil minister, Bijan Namdar Zanganeh. The lower end of the production target equates to a nearly 750,000 barrels-a-day drop from what OPEC said it pumped in August. The deal will likely reverberate beyond the bloc, burnishing prospects for the energy industry and boosting the economies of oil-rich countries such as Russia and Saudi Arabia.
Copper futures gained 0.6 percent to $2.2005 a pound, rising for a second day, while gold for immediate delivery climbed 0.1 percent to $1,323.35 an ounce, snapping a two-day decline.
New Zealand’s S&P/NZX 50 Index, the first major equity gauge to start trading each day, added 0.5 percent, climbing for a second day. Futures on the S&P 500 Index were little changed at 2,163.25 after energy stocks led gains last session in their biggest surge since January.
Futures on Australia’s S&P/ASX 200 Index rose at least 0.4 percent with those on the Kospi index in Seoul, while contracts on Hong Kong’s Hang Seng and Hang Seng China Enterprises indexes dropped 0.3 percent in most recent trading. Nikkei 225 Stock Average futures were bid up 0.4 percent to 16,530 in the Osaka pre-market and Chicago-listed contracts increased 0.3 percent to 16,595 early Thursday following a 0.5 percent advance.
As well as the OPEC deal, investors also mulled comments from Federal Reserve officials Wednesday for clues as to the timing of U.S. interest-rate increases.
Chair Janet Yellen told lawmakers that the majority of the central bank’s policy-setting group sees a rate increase as likely this year. Meanwhile, Chicago Fed President Charles Evans said an extended period of low rates will leave policy makers with less room to navigate future shocks and reiterated that the “lower-for-longer” view is taking hold among businesses and investors.
Meanwhile, traders are looking for signs that the world’s largest economy is strengthening and awaiting the next earnings season, which will kick off in about two weeks. A report Wednesday showed orders for durable goods in the U.S. were little changed in August, while shipments of capital equipment declined for a fourth straight month, indicating lingering weakness in manufacturing. A revised reading on second-quarter growth, pending home sales as well as measures of personal income and spending are due later this week.
One-month NDFs on the ringgit rose to 4.1086 per dollar, with Malaysia Asia’s only net oil exporter.
The Loonie extended gains into a third day, strengthening 0.2 percent as the Norwegian krone traded steady following Wednesday’s 1 percent jump. The Australian dollar was near its strongest level since the start of the month, while the yen weakened 0.3 percent to 101.01 per dollar, on track for a three-day slide.
The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, slipped for a fourth straight day, losing 0.1 percent to be headed for its lowest close since Sept. 12.