Oil

IN the London market, oil prices edged higher last Thursday after the International Energy Agency said the market was nearing balance, while data showing higher US production kept gains in check.

Benchmark Brent crude futures were up 13 cents at $55.99/barrel at 1525GMT, on track for their third straight weekly gain after touching a one-month high on Wednesday. US West Texas Intermediate crude futures were up 22 cents at $53.33/barrel, also set for a third consecutive weekly gain.

The Paris-based IEA, which advises industrial nations on energy policy, said on Thursday supply and demand in the global oil market was close to matching after a fall in stockpiles in developed countries in March.

The market has been oversupplied for three years, prompting members of the Opec and some non-Opec producers to agree to cut output in the first six months of 2017 to rein in the glut.

The IEA said oil stocks in the OECD) industrialised countries fell by 17.2m barrels in March, although inventories were still 300m barrels above the five-year average.

Opec’s oil output fell in March to sit below the level where the cartel estimates demand for its crude this year, as attempts to tighten the market were bolstered by supply disruptions in member countries.

In its monthly market report, Opec said the group’s production — based on secondary sources used to assess members’ output — dropped 152,700bpd to 31.9mbpd last month, led by declines in Libya, Nigeria, UAE and Iran.

The biggest declines came in Libya and Nigeria who are not subject to the Opec output agreement came due to long-running disruptions caused by violence and political unrest in the countries. Members party to the output cut agreements also collectively trimmed output.

But Opec revised up its estimate of oil supply growth from producers outside the group this year to 580,000bpd, as higher oil prices following the supply cut help spur a revival in US shale drilling.

Due to the higher expectations from outside producers, OPEC trimmed forecast demand for its crude in 2017 to 32.22mbpd — 130,000 less than last month but more than current production, suggesting stocks will drop if output does not rise.

Opec and other producers, including Russia, agreed late in November to cut output by around 1.8mbpd in the first half of 2017 to rein in oversupply.

State-owned Saudi Arabian Oil Co lowered its official selling pricing for all grades to northwest Europe for the second straight month, along with all prices to the Mediterranean and some to Asia, against regional benchmarks.

Saudi Arabia is apparently seeking to expand market share in the region dominated by Russia.

Gold

GOLD rallied to a five-month high last Thursday before slipping slightly, on track for its best week since June, after the previous day’s comments by US President Donald Trump on the strength of the dollar knocked the currency half a per cent lower.

Gold had risen amid rising tensions over US relations with Russia and North Korea, with prices also buoyed as the dollar slid after President Donald Trump reportedly said the currency was too strong.

Spot gold had slipped 0.1pc to $1,285.26/oz, after hitting its strongest since Nov 10 at 1,287.98. US gold futures climbed 0.7pc to $1,287.50. The dollar took a heavy hit after Trump told the Wall Street Journal the dollar ‘is getting too strong’ and that he would prefer the Federal Reserve to keep interest rates low.

Among the major physical gold markets, the precious metal was sold at a discount to spot prices in India last week for the first time in six weeks, while demand elsewhere in Asia remained subdued as surging bullion prices deterred buyers.

Dealers in India, the world’s second-largest consumer of the metal, were offering a discount of up to $1/oz last week over official domestic prices. Dealers were charging a premium of $1 a week earlier. The domestic price includes a 10pc import tax.

Easing demand last week in top consumer China narrowed gold premiums to $6-7/oz over international spot prices, compared with the $10-12 levels quoted a week earlier.

Among other gold trading centres, premiums in Singapore were seen at $1.20-1.50, unchanged from previous week, and Hong Kong premiums fell to around 60-90 cents from 70 cents to $1/oz seen last week. Prices in Japan were at a discount of around 50 cents an ounce.

Gold imports by India are said to have jumped almost seven-fold in March from a year earlier when a levy was imposed on local jewelry, further dented by the withdrawal of high-denomination currency notes.

Published in Dawn, Economic & Business, April 17th, 2017

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