Oil

OIL prices dropped on Friday amid doubts that Opec’s first planned output cut in eight years would make a substantial dent in the global crude glut.

Brent crude futures LCOc1 had fallen 31 cents to $48.93/barrel, after settling at the previous session at 55 cents, or 1.1pc. US crude CLc1, was down 28 cents at $47.55, after having touched a one-month high of $48.32.

The Opec reached agreement to limit its production to a range of 32.5-33mbpd in talks held on the sidelines of the September 26-28 International Energy Forum in Algiers. Opec estimates its current output at 33.24mbpd.

Opec will consider agree to production levels for each member country at its November 30 meeting in Vienna, group officials said. After reaching its group target, it will seek support from non-member oil producers to further ease the global glut. The deal in Algiers follows failed talks in Qatar in April for a production freeze.

India’s federal cabinet last Wednesday approved two deals worth over $3.26bn that will allow a consortium of Indian state-run oil companies to buy stakes in two Russian oil fields.

A consortium of Oil India Ltd, Indian Oil Corp Ltd and Bharat Petro Resources Ltd, had in March agreed with Russian state-run oil company Rosneft to buy a 23.9pc stake in its Vankor oil fields. The deal, worth about $2.02bn, was approved by the cabinet.

The cabinet also approved another deal worth $1.24bn reached by the three companies earlier this year to acquire a 29.9pc stake in Russia’s Taas-Yuryakh oil field.

The deals reflect India’s growing interest in snapping up cheap offshore assets amid the tumble in global crude-oil prices. India is the world’s third-largest energy consumer and imports roughly 75pc of its oil.

With lower crude prices making investments in energy development abroad more affordable, India has asked state enterprises to look for deals with resource-rich nations such as Russia, Saudi Arabia, the UAE and, now that international sanctions have lifted, Iran.

The slump in global energy prices means oil-producing countries face a ‘clear need’ to diversify their economies and improve competitiveness, the World Economic Forum (WEF) said in its latest competitiveness survey.

Gulf countries reliant on oil exports have struggled since the slump in energy prices began in July 201. For example, the IMF sees Saudi Arabia’s economy growing by 1.2pc this year, down from 3.5pc in 2015 and 3.6pc in 2014.

The Gulf states were the weak performers in WEF’s global competitiveness index, with only three economies in the top 30: The UAE (16), Qatar (18) and Saudi Arabia (29).

Gold

IN the New York market gold was up a shade on Thursday after the dollar flip-flopped in the wake of mixed US data and as scepticism grew over whether Opec members would be able to implement production cuts that could fuel inflation.

The dollar index, which measures the greenback against a basket of currencies, rose to a session high after stronger than expected data on US second-quarter economic growth and jobless claims.

The dollar, however, pared gains after further data showed contracts to buy previously owned US homes dropped in August to their lowest level since January.

Spot gold was up 0.18pc at $1,323.61/ounce having touched an overnight high of $1,325.80. US gold futures settled up 0.2pc at $1,326. Gold pared earlier gains in the aftermath of a decision by the Opec on Wednesday to make modest output cuts in the first such deal since 2008.

Gold gained on the final day of the quarter as rising investor anxiety over Deutsche Bank AG’s finances spurred a selloff in equities and helped to underpin demand for a haven.

Bullion for immediate delivery rose as much as 0.3pc to $1,324.86/ounce and traded at $1,323.52. That’s the first gain in four days and pares the metal’s decline this week to 1.1pc.

S&P Global Market Intelligence found that Latin America accounted for the largest amount of planned and completed capital spending on gold announced from the beginning of 2015 through June 30, 2016, with $5.58bn in investments. Canada-US was second with $5bn, including $1bn allocated by Barrick Gold Corp to develop the Goldrush project in Nevada.

Russia’s gold sales in China are set to expand as VTB Capital boosts sales and Sberbank PJSC prepares to enter the market, chasing demand in the world’s biggest consumer of bullion.

Copper

COPPER prices traded higher on Thursday, helped by positive sentiment on oil and China, the world’s largest consumer of the industrial metal. Copper for December delivery was recently up 0.5pc at $2.1985/pound on the Comex division of the New York Mercantile Exchange.

Copper prices are influenced by oil as investors buy and sell broad baskets of commodities, with oil typically accounting for a large proportion. US oil futures were recently up 0.3pc at $47.15/barrel.

Copper has gotten a boost in recent weeks from encouraging economic data from China that signaled stability for the major copper consumer. China accounts for 45pc of global demand.

China, the world’s biggest consumer of copper, cut imports of the refined metal to the lowest level in 18 months in August as domestic production climbed amid increasing foreign purchases of ore and concentrate.

Inbound shipments of refined metal slumped for a fifth month to 232,066 metric tonnes from 251,235 tonnes in July and 262,691 tonnes a year earlier. Refined-metal exports jumped more than four-fold from a year earlier.

Purchases of refined metal were still 16pc higher in the first eight months from a year earlier, the data showed, after record shipments in the first half on the back of a credit boom and property rebound.

Published in Dawn, Business & Finance weekly, October 3rd, 2016