Oil prices hit the highest level since March after major producers agreed to a cautious increase in output that eased fears of oversupply.

Brent crude, the international benchmark, rose 1.4 per cent to $49.39 a barrel. US marker West Texas Intermediate climbed by a similar margin to $46.51.

On Thursday evening, Russia and Opec forged an agreement to boost oil supply by 500,000 barrels a day from January, which was a quarter of what they had agreed to previously.

“The oil price is being supported by technical factors” such as the supply agreement and a weaker US dollar, said Monica Defend, head of research at fund manager Amundi.

“Developed markets remain in the grip of the second wave of the pandemic and this is reflected in poor demand for travel,” she cautioned.

“We do not expect to see oil at $55 until the second half of next year, on the basis that [coronavirus] vaccines can be widely distributed and aeroplanes are back in the sky.”

A weaker dollar boosts crude prices since it makes it less expensive for holders of other currencies to purchase the commodity. But expectations of an oil price recovery after the pandemic vary widely, with Opec bullish on consumption while forecasts from oil producers and airlines suggest a peak in demand is close.

The dollar index, which measures the buck against trading partners’ currencies, fell 0.1 per cent on Friday morning, hovering around a two-and-a-half-year low.

London’s FTSE 100 index, which has heavy weightings of oil producers, miners and commodities traders, was the best performer in Europe on Friday morning, rising 0.9 per cent. The Stoxx 600 European equity benchmark added 0.3 per cent while Germany’s Xetra Dax traded flat.

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The FTSE All-World share index rose a further 0.1 per cent on Friday to eke out a record high while MSCI’s index of Asia-Pacific shares advanced 0.7 per cent to a new record.

This came after the latest signs of progress in talks between US lawmakers about a second stimulus package for the world’s largest economy.

Mitch McConnell, the most senior Republican in the US Senate, said on Thursday that an agreement on a relief plan, which Republicans and Democrats have wrangled over for months, was “within reach”.

The positive mood towards economies reopening also lifted the price of New York-traded copper futures by 0.9 per cent to $3,511 a tonne on Friday, the highest since October 2013.

On Wall Street, futures markets signalled the S&P 500 share index would open 0.3 per cent higher while the Nasdaq 100 would add 0.4 per cent.

This came ahead of the closely watched US non-farm payrolls data for November. Economists polled by Reuters expected the jobs numbers to show employers added 469,000 posts in November, down from 638,000 in October, as the second wave of coronavirus has torn through US states.

A weaker than expected payroll number could “put some cracks in the economic recovery narrative” on stock markets, said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management.

However, a much stronger number than forecast could add momentum to trades that predict consumer price increases in the US, he added, with US Treasury bonds selling off and the prices of inflation-protected securities moving higher.

Via Financial Times

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