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Monday, November 21, 2016
Markets rise, led by higher prices for oil
Dow added 30, advancers over decliners better than 2-1 & NAZ went up 16. the MLP index inched higher in the 302s & the REIT index rose 1 to the 323s. Junk bond funds were a little higher & Treasuries rose. Oil shot up to the 47s & gold was up a tad.
Oil extended gains as Iran signaled optimism that OPEC will agree to a
supply-cut deal & Iraq said it will offer new proposals to help
bolster the group's unity before members meet next week.. Prices rose almost 3%, adding to last week’s
5.3% gain. Iranian Oil Minister Bijan Namdar Zanganeh said it’s
“highly probable” OPEC will reach a consensus & Iraq will make proposals to help reach an agreement (according to a leaker)..
Oil
has rebounded from an 8-week low on Nov 14 as members of OPEC make renewed efforts before the Nov 30 meeting to finalize the supply deal they agreed to
informally in Sep. The plan to trim output for the first
time in 8 years is complicated by Iran's commitment to boost production & Iraq's request for an exemption to help fund its war with Islamist militants. West
Texas Intermediate for Dec, which expires today, $1.27 to $46.96 a barrel. The more-active Jan
contract advanced $1.34 (2.9), to $47.70 a barrel. It’s likely that OPEC producers will honor the output-cut
agreement & try to put it into action, Iran's Zanganeh said after
the meeting on
Sat.. Iraq's “legitimate demands” shouldn’t be considered an
obstacle to reaching a deal to freeze production, was reported.
The Bank of England may boost the amount covered by the UK's bank
deposit guarantee after the vote to leave the EU caused the
£ to plunge. The BOE’s Prudential Regulation Authority
proposed to restore the limit to £85K ($105K) from £75K, the level set in Jul 2015. EU law required non-euro member
states to adjust their deposit guarantees at that time to the equivalent
of €100K, the PRA said. “Taking
into consideration the developments in financial markets” following the
June 23 Brexit vote, including with respect to the £-€ exchange
rate, the PRA “considers that a structural shift in the exchange rate
has occurred,” the regulator added. “These events were unforeseen when
the U.K. limit was reduced in 2015.” The £ has fallen about 11% against the € since the referendum
amid concern about the potential economic impact of lost access to the
EU's single market.
British pound since Brexit vote
The
proposal “is intended to provide a measure of memorability and
consistency,” the PRA said. The regulator will “continue to monitor
fluctuations in the exchange rate but, barring unforeseen events, will
seek to avoid making further adjustments to the deposit protection
limit.”
The average price of regular grade gasoline has fallen nationally to
$2.20 per gallon, a drop of 6¢ over the past 2 weeks. An industry predicting that prices would continue inching down unless a meeting of
oil-producing nations later this month culminates in "a credible
agreement to freeze or reduce" production. A seasonal weakness in demand was one reason behind the
early-Nov decline. With autumn
maintenance projects wrapping up, US refiners are increasing supplies. Those factors combined to create the drop in average prices, despite a small rise in crude oil prices.
In this semi-holiday week, oil is rising on excitement that producing countries can agree on production limits. Based on OPEC's track record of getting its countries to agree on anything, that is not a good bet. Price swings in stocks don't mean a lot this week.
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