Oil

GLOBAL oil prices edged back from a 2015 high on April 16, as traders took some profits from a weeks-long rally and the Opec reported a sudden surge in March production.

The US crude retraced some of the previous day’s nearly 6pc gains that followed government data showing the smallest weekly inventory build since the week ending January 2, suggesting that months of oversupply may be starting to ease.

The Opec raised output by 890,000bpd to 31.02mbpd in March, the IEA estimated. The increase in production came mainly from Saudi Arabia, which raised output by 390,000bpd and Iran, which raised output by 1.2m barrels per annum. Iraq and Libya also increased their output.

Brent crude for June delivery LCOc1 fell 49 cents to $62.83/barrel, after opening at $63.29, posting a front-month Brent peak price for the year.

Oil prices fell in early trading, ending a run of rallies earlier in the week, after Opec said that its output surged in March, adding to a global glut.

Front-month Brent crude futures were down 15 cents since their last settlement to $63.83/barrel. The US crude was down 20 cents at $56.50/barrel.

Thanks to dipping output from the US and other rival producers due to oil prices halving since June last year, Opec said demand for its oil this year would be higher than previously thought.

The boom in US oil supplies will end in 2015, the Opec said last week, joining other major energy forecasters in pointing to an imminent fall in American production.

Meanwhile, Opec said that demand for its own crude would rise slightly to roughly 29.3mbpd in 2015.

At the same time, demand for non-Opec supplies would fall by about 165,000bpd, it said.

In its monthly market report, Opec said US oil supplies would grow to about 13.65mbpd in the second quarter of 2015 and then level off, beginning to decline in the second half of the year.

The number includes crude oil and other petroleum liquids such as condensates.

US oil production has nearly doubled since 2008, driven by hydraulic fracturing technology that unlocked crude and other petroleum products in deep underground shale formations.

The boom contributed to an oversupply of petroleum that has helped cause oil prices to crash since last summer, falling by more than 50pc from highs of $114/barrel for Brent crude, the global benchmark.

World oil markets may take longer to tighten than expected due to a surge in Opec supply and a potential rise in Iranian exports, even as demand shows signs of strength, the International Energy Agency said last week.

The agency raised its forecast for global oil demand growth in 2015 for a second consecutive month, citing strong pockets of consumption in Europe, India and the US.

Global oil demand is rising faster than projected, but so is supply, and the IEA, which advises industrialised countries on energy policy, rolled back its prediction of when the market would tighten.

The IEA raised its forecast for growth in world oil use this year by 90,000bpd to 1.08mbpd, bringing demand in 2015 to an average of 93.60mbpd. It said consumption may falter in some areas but Opec production was likely to stay high and could even rise further in April.

The agency left its forecast of demand for Opec crude in 2015 unchanged at 29.50mbpd, pointing to a rising supply surplus if Opec keeps the same output.

Gold

IN the London market, gold slid below $1,200/ounce on April 16, as the dollar pared losses after upbeat US factory data and demand for physical metal stayed weak, though uncertainty over the timing of a Federal Reserve rate increase underpinned prices.

The dollar index, strength in which tends to weigh on gold, recovered from lows against a basket of currencies after a survey showed factory activity in the US mid-Atlantic region accelerated in April.

Spot gold was down 0.5pc at $1,194.95 an ounce, off an early high of $1,209.10, while US gold for June delivery fell from $6.20 to $1,995.10/ounce.

In worldwide trade, the shiny-metal rebounded the following day to trade above the psychologically important $1,200-level taking support from perceived dollar weakness as well disappointing US industrial production data amid speculation that the Federal Reserve could delay hiking interest rates.

Spot gold was substantially higher at $1,206.40/ounce in early European trade, while spot silver quoted at $16.48/ounce.

Analysts have made big cuts to expectations for gold and silver prices this year and next after the metals, weighed down by the prospect of higher US interest rates, failed to recover last year’s losses in early 2015.

Prices are forecast at $1,209/ounce for gold this year. In 2016, gold is now expected to average $1,250/ounce, down from an earlier forecast of $1,278/ounce.

Weak prices have in the past led to strong demand growth from the key physical gold markets in Asia, particularly China and India. Demand for jewelry, coins and bars hit record levels in 2013 after gold prices plunged. However, current prices do not seem to be stimulating the same response.

The Reserve Bank of India is reported to be ‘deeply concerned’ over the sudden jump in gold imports in March this year. It said it is keeping a close eye on rising gold imports into the country.

The Indian gold market is saturated with supply. The demand is expected to remain low during June and July with no festivities around, the wedding season nearly over, and reduced gold imports in the wake of gold monetisation schemes.

Published in Dawn, Economic & Business, April 20th , 2015

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