Oil

Oil fell on November 26, as fears of escalating violence causing supply disruption in the Middle East faded and focus returned to a persistent market glut and increased global output.

Brent LCOc1 was down 46 cents to $45.71/barrel. West Texas Intermediate (WTI) futures CLc1 were down 21 cents at $42.83/barrel after the US crude rose to $43.30 earlier in the session. A day earlier oil recorded a sixth consecutive gain after a smaller-than-expected US inventory build and a fall in US oil rig counts. Investors also trimmed short positions ahead of the Thanksgiving break in the US.

Brent is down by nearly 8pc in November and by 20pc this year, after tumbling from above $115 last year.

Oil prices had risen on November 24 on fears of a supply disruption after the Turkish military shot down a Russian jet fighter along the Syrian border.

Gasoline surged nearly 6pc because of limited supplies in the Northeast ahead of Thanksgiving. The benchmark US crude-oil price soared more than 4pc during intraday trading in the hours following the first reports of the fighter-plane incident, which escalated tensions between Russia and Turkey. Oil later pared gains. The rise illustrates how geopolitical risks can still rattle the oil market even as it remains mired in a supply glut that shows few signs of receding.

Crude oil futures fell on Friday with losses this month standing at over 8pc, hurt by disappointing Chinese economic data and worries over a supply glut.

A firmer US dollar also weighed on oil, making greenback-denominated contracts more expensive for holders of other currencies. Although trading was quiet after Thanksgiving Day in the US.

Brent crude had dropped four cents to $45.42/barrel by 0240 GMT, after settling down 71 cents at $45.46 in the previous session. West Texas Intermediate (WTI) futures, the US crude benchmark, fell 50 cents, or 1.16pc, to $42.54/barrel. They are up 5.3pc so far this week, but have plunged 8.7pc since the beginning of the month.

Profits earned by Chinese industrial companies fell 4.6pc in October from a year earlier, data from the country’s statistics bureau showed on Friday, declining for the fifth consecutive month.

Opec is determined to keep pumping oil to defend market share, alarming some of the group’s weaker members who fear prices may slump towards $20.

On November 25, the EIA reported US crude inventories grew 1m barrels in the week ended November 20. The figure was below the 2.6m barrel growth estimated by industry group American Petroleum Institute. Data also showed US production of crude slid by 17,000bpd to 9.165m barrels, compared with the previous week, but the four-week average daily production of 9.173m barrels was still 144,000 barrels above the same period last year.

Excess supplies amid tepid demand has sheared oil prices by nearly half since summer last year after the Saudi Arabia-led Opec decided to allow market forces to set prices. The tactic is aimed at defending market share while knock out players who can’t compete in a low-priced environment.

At 488.2m barrels, the US crude stockpiles is at levels unseen in at least 80 years, but some analysts believe the gradual decline in production indicates Opec’s ‘no-cut’ tactic is working.

Gold

Gold was trading near its lowest in nearly six years on November 26, as the dollar held at multi-month highs after US economic data reinforced expectations of an interest rate rise this year.

The US currency was also supported against the euro, weighing on dollar-denominated gold, as European Central Bank officials told Reuters they were considering options such as whether to stagger charges on banks hoarding cash or to buy more debt. The ECB meets next week.

Spot gold was up 0.2 at $1,072.86/ounce, not far off $1,064.95 hit last week, the lowest since February 2010.

In the physical markets, buying interest picked up as gold prices stayed near multi-year lows.

Premiums on the Shanghai Gold Exchange, a proxy for demand in top consumer China, were trading at a healthy $5-6/ounce on Thursday, versus $3-4 in the beginning of the month.

China’s net gold imports from main conduit Hong Kong fell in October from a 10-month high reached in the previous month, data showed on Thursday.

Third-quarter gold buying in India, the world’s biggest consumer, is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for millions of farmers.

Spot gold was steady at $1,072.20/ounce by 0041GMT, after closing flat on Thursday as liquidity was thin due to the US Thanksgiving holiday.

The metal is down 0.5pc for the week after dropping to $1,064.95 last week, its lowest since February 2010. US gold futures were also headed for a sixth consecutive weekly decline. Silver looked set to post a 1pc weekly gain, snapping a five-week losing streak.

Copper

Copper prices plunged back to $2.00/pound last week, the first time they have touched that level since the last gasps of the Great Recession in 2009. Prices are down nearly 60pc from their 2011 highs of more than $4.60, and plenty of experts think they will keep going lower. China’s economic slowdown remains the key drag.

Copper prices have been trending down for more than four years, but the decline accelerated over the summer, as the US dollar rallied (since copper is priced in that currency, that made it pricier for foreign buyers).

Published in Dawn, Business & Finance weekly, November 30th, 2015