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Oil rally gathers pace on hopes for output cut

Monday 08.00 GMT. Oil prices are making notable gains, tracking the prospect of a deal on output cuts between major producers, setting Brent crude on course for its first two-session advance since early October.

Brent crude, the international benchmark, is up 1.3 per cent at $47.47 a barrel, while West Texas Intermediate is 1.3 per cent stronger at $46.30.

After the Asia-Pacific Economic Cooperation summit in Peru, Russian President Vladimir Putin told reporters he saw few hurdles to Opec reaching an agreement on supply cuts at its Vienna meeting scheduled for later this month. That added to comments from Iran’s oil minister over the weekend that he was optimistic Opec members will agree to proposed supply cuts at the forthcoming Vienna meeting, while Iraq has been reported to offer three new proposals this week for the output cuts.

The rally in oil is all the more eye-catching in the context of the sustained run higher for the dollar, strength for which can temper gains for commodity contracts denominated in the currency. The dollar index is holding steady at 101.21 after a 4.3 per cent rise over 10 consecutive sessions to Friday, one of the dollar’s longest winning streaks on record. It leaves the index, which tracks the world’s reserve currency against six of its peers, trading around levels last touched in 2003.

That has put pressure on the euro, as well as the Chinese renminbi’s trading band, which are both facing record stretches of weakness. The euro is regaining some ground on Monday, up 0.2 per cent at $1.0611, with the pound flat at $1.2341.

The wider dollar gains have come as markets surmised that Donald Trump’s presidency could boost the US economy and bring about tighter monetary policy. But concerns about the strength of the dollar weighed on Wall Street on Friday, dragging the S&P 500 down 0.2 per cent.

European stock markets are marginally higher, with the region-wide Euro Stoxx 600 up 0.1 per cent, while Frankfurt’s Xetra Dax 30 climbs 0.3 per cent and London’s FTSE 100 rises 0.3 per cent.

Asian stocks are mostly higher on Monday, with the Nikkei 225 up 0.8 per cent, while Hong Kong’s Hang Seng added 0.2 per cent. China’s Shanghai Composite was up 0.8 per cent while the technology-focused Shenzhen Composite added 0.4 per cent.

Asian currencies are mostly weaker. Japan’s yen swung from early gains to be 0.1 per cent weaker at ¥110.96 per dollar, following data showing both imports and exports shrank by more than expected in October.

China’s renminbi was 0.13 per cent softer after the country’s central bank weakened the trading range for the currency for a record 12th day in a row.

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