OIL

OIL prices were slightly higher last Thursday ahead of next week’s meeting of the Opec to discuss implementation of its proposed cap on production. Brent crude futures LCOc1 were up 12 cents at $49.07/barrel at 1501GMT (10:01am ET). West Texas Intermediate crude CLc1 rose 9 cents to $48.05.

Traders said market activity was low because of the US Thanksgiving holiday and there was a reluctance to take on big price bets amid uncertainty about the planned Opec-led production cut.

Iraq is willing to cut some of its own production, in a move that could smooth the way to a supply deal when Opec.

The price of Brent crude, the international benchmark, rose 20 cents to $49.28/barrel following this news, from an earlier low of $48.56/barrel. West Texas Intermediate increased 25 cents to $48.27 a barrel, from a low of $47.40.

A preliminary agreement was reached in September in Algiers to reduce output in an effort to end a two-year old supply glut and bolster prices.

Iran will not cut but freeze production as it recovers after years of western sanctions. Saudi Arabia has indicated it may be willing to give Iran some flexibility but still wants it to agree to some restrictions.

Opec reached an accord in Algiers to limit production to between 32.5mbpd and 33mbpd. Consensus around a final deal would imply a cut of at least 800,000bpd from current levels.

Saudi Arabia has said any deal should be coordinated and credible. It has also sought support from Russia, the largest exporter outside the cartel, which has said it would work with the kingdom to stabilise the market.

For months, Russia has told Opec its preferred option in any eventual oil-supply deal was to freeze production, rather than to cut it. Facing pressure from Opec to make a significant output reduction, Russia reiterated its readiness to freeze oil production at current levels, arguing that the offer amounted to a cut compared with next year’s plans.

A production cap would mean Russia pumping 0.2-0.3mbpd less than planned in 2017. That means a freeze would be “quite a difficult and harsh situation for us as our plans envisioned an output growth next year,” the Russian energy minister said on Thursday.

With prices languishing at under $50/barrel, about 55pc below its 2014 peak, small sellers have been the most vulnerable to falling revenues. Nigeria has been pushed to the brink of its first full-year economic contraction in 25 years, while Venezuela struggles to ward off a debt default at its national oil company.

India imports more than two-thirds of its oil from the Middle East and its demand is forecast to double through 2040 to 10.3mbpd, is seeking to diversify its purchases to guard against the geopolitical risks tied to the world’s biggest suppliers like Saudi Arabia and Iraq.

Over 80pc of India’s crude is imported. Companies such as the BP Plc and Russia’s Rosneft PJSC are eyeing a piece of an oil retail market already worth $117bn.

The world’s listed oil companies have slashed oil output by 2.4pc so far this year during one of the industry’s worst downturns as Opec battles to agree on its first production cut since 2008.

The aggregated production of 109 listed companies that produce more than a third of the world’s oil fell in the third quarter of 2016 by 838,000bpd from a year earlier to 33.88mbpd, data provided by Morgan Stanley showed.

By comparison, the Opec produced 33.64mbpd in October. Opec has struggled to agree on a joint production freeze or cut to support oil prices before its meeting in Vienna.

The firms include national oil champions of China, Russia and Brazil, international producers such as Exxon Mobil and Royal Dutch Shell, as well as US shale oil producers like EOG Resources and Occidental Petroleum.

Gold

Gold was trading at its lowest level in 9½ months on Thursday as the strong dollar and speculation about an Indian import ban continued to take the shine off the metal.

Gold was down 0.1pc at $1.186.80/troy ounce in volatile morning trade in London. It shed over 2pc on Wednesday to close below $1,200/ounce for the first time since February.

Gold prices fell to an eight-month low last Wednesday, weighed down by a rising dollar and expectations for an interest-rate increase in December. Gold for December delivery settled down 1.8pc at $1,189.30/troy ounce on the Comex division of the New York Mercantile Exchange, its lowest close since Feb 5.

In the Singapore market gold traded below $1,200/ounce as prospects for economy-boosting policies by Donald Trump help the Federal Reserve gear up for a rate rise.

Gold for immediate delivery fell as much as 0.5pc to $1,182.95/ounce and was at $1,187.02 at 1:34 pm in Singapore. Prices sank to $1,181.84 on Wednesday, the lowest since February, and are down 7.1pc this month, the most since June 2013.

The price of gold has breached the psychologically important $1,200/ounce level after reaching an all-time high of over $1,800 in 2011.

One of the factors affecting gold is the value of the dollar, which is influenced by the level of interest rates in the US economy (among other things). Gold, on the other hand, doesn’t pay dividends or interest. Its value depends solely on its price. If more attractive investments are available elsewhere, gold tends to be replaced in investors’ portfolios.

Gold exports from Switzerland totaled 163mt in October, 10pc higher than the 147mt in September, Swiss federal customs data showed. The figure is 19pc lower than just over 200mt reported a year earlier, with higher exports to India and Hong Kong offsetting a fall in flows to the UK and US.

Total exports from Switzerland now stand at 1,510mt for the year to date, up just 0.5pc from 1,502mt in the same period of 2015. Exports to India were up 49pc on the month at 40.2mt, the highest since January, but down 46pc from 75mt a year earlier.

Published in Dawn, Business & Finance weekly, November 28th, 2016