Crude Oil Ends Higher After China Rate Cut, Draghi Comments

(RTTNews) - U.S. crude oil ended higher for a second straight session Friday, as China moved to prop up its sagging economy with an unexpected interest rate cut and on comments by European Central Bank President Mario Draghi on additional stimulus, notwithstanding a strong dollar.

The People's Bank of China today cut its key lending rate to 5.6 percent, to spur economic growth. The deposit rate has been reduced to 2.75 percent. The surprise rate cut, which was the first reduction since July 2012, comes as the world's second largest economy is forecast to log its weakest growth in nearly 25 years.

Yesterday's encouraging U.S. economic data and remarks from European Central Bank President Mario Draghi on additional stimulus to contain deflation also contributed to oil's rise.

Speaking at the Frankfurt European Banking Congress, Draghi said the central bank will expand its asset purchase program if inflation fails to show signs of returning to the targeted level.

Meanwhile, investors look ahead to the OPEC meet due November 27 in Vienna, with speculation rife the cartel may agree on a production cut to check falling prices, even as some OPEC members oppose any production cut. Though a reduction in OPEC crude output is likely, a few members including Saudi Arabia have indicated that they would rather keep production high and cut prices than reduce output.

Light Sweet Crude Oil futures for January delivery, the most actively traded contract, gained $0.66 or 0.9 percent to close at $76.51 a barrel on the New York Mercantile Exchange Friday.

Crude prices for January delivery scaled a high of $77.83 a barrel intraday and a low of $75.62.

On Thursday, crude oil futures ended higher at $75.85 a barrel, up $1.35 or 1.8 percent, on some upbeat economic data from the U.S., amid expectation the OPEC may lower its output to keep prices under check at its meeting in Vienna next week.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.35 on Friday, up from its previous close of 87.70 late Thursday in North American trade. The dollar scaled a high of 88.39 intraday and a low of 87.45.

The euro trended lower against the dollar at $1.2382 on Friday, as compared to its previous close of $1.2539 late Thursday in North American trade. The euro scaled a high of $1.2568 intraday and a low of $1.2376.

In a significant move, the People's Bank of China cut its key one-year lending rate by 40 basis points to 5.6 percent and the one-year deposit rate was lowered by 25 basis points to 2.75 percent.

Meanwhile, hopes of additional stimulus from the European Central Bank have increased after the bank's President Mario Draghi said the ECB will expand its asset purchase program if inflation fails to show signs of returning to the targeted level.

Eurozone consumer confidence declined in November, defying expectations for an increase, preliminary data from the European Commission showed Friday. The flash consumer confidence indicator decreased to -11.6 from a -11.1 in October. Economists had forecast the index to rise to -10.7. For the EU, the consumer confidence index slid by 0.8 points to -8.2.

The leading index for Germany remained flat in September, data from the Conference Board showed Friday. The leading index was unchanged month-over-month in September after the 1.3 percent decline in August. The coincident index, a measure of current economic conditions, also remained flat in September following the 0.3 percent drop in the previous month.