Oil

Oil prices rose last Thursday after US crude and gasoline stockpiles fell, but worries over whether Opec-led output cuts would be able to rein in a three-year glut continued to drag.

Brent crude futures were 4 cents higher at $44.86/barrel, after falling 2.6pc in the previous session to their lowest since August 2016.

US crude futures were up 6 cents at $42.59/barrel. Last Wednesday, they settled down at $42.53, after touching their lowest intraday level since August 2016.

Since peaking in late February, crude has dropped around 20pc, with only brief rallies, completely erasing gains at the end of the year in the wake of the initial Opec-led production cut.

Opec and other producers agreed to cut output by 1.8mbpd from January for six months, subsequently extended for a further nine months.

Libya’s production has climbed in recent months to 885,000bpd last week, roughly triple its production of only a year ago.

Libyan oil executives are projecting that their production will reach 1mbpd by the end of July, a level not seen in four years.

The unexpected production in Libya has added to the downward pressure on prices. West Texas intermediate crude last Tuesday at the lowest point since last year, $43.23, a decline of 2.2pc.

Libya, along with Iran and Nigeria, was excluded from the OPEC agreement to slash production last year by more than 1mbpd.

More than $2tr of planned investment in oil and gas projects by 2025 could be redundant if governments stick to targets to lower carbon emissions to limit global warming to 2°C.

Almost 10pc of China’s refining capacity is set to be shut down during the third quarter, signaling that demand growth from the world’s top crude importer is stuttering further.

West African and European suppliers are already feeling the chill from China’s reduced demand, and a global glut has dragged spot prices for crude last week to their lowest since November, 2016.

Adding to these cuts, around 1.3mbpd of refining capacity is going to shut in the third quarter as four state-run refineries and six independents begin planned maintenance, data provided by China Sublime Information Group showed.

Those closures mean almost 10pc of China’s 15.1mbpd total refining capacity will go off stream in the third quarter.

Gold

IN the New York /London market, gold rose last Thursday, rising quietly above the prior session’s five-week low as the dollar steadied and the 200-day moving average provided short-term support below the market. Spot gold was up 0.3pc at $1,249.17/oz. It had added 0.3pc in the previous session after touching a five- week low of $1,240.75.

US gold future for August delivery settled up 0.3pc at $1,249.40.

The US Treasury yield curve flattened to almost 10-year lows last Wednesday as investors evaluated the impact of hawkish Federal Reserve policy on the economy even as inflation measures are deteriorating.

US home resales unexpectedly rose in May to the third highest monthly level in a decade and a chronic inventory shortage pushed the median home price to an all-time high.

Gold is highly sensitive to rising rates and yields, which increase the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.

Copper

THE global refined copper market saw a surplus of around 165,000MT in the first quarter of 2017, according to preliminary data released last Tuesday by the International Copper Study Group.

Factoring in changes to private, unreported copper stocks in China, the first-quarter surplus rose to about 310,000MT, it said.

World mine production is estimated to have declined by around 3.5pc year on year in the first quarter to 4.63mMT, with concentrate production declining by around 3pc and solvent extraction-electrowinning (SX-EW) declining by 6pc, ICSG analysts said.

The decline was mainly related to a 14pc YoY decline in Chilean production, which was affected by a strike at the Escondida mine, as well as lower output from state-owned Codelco, the ICSG said.

Q1 mine output was also negatively affected by declines in Canadian and Mongolian concentrate production of 18pc and 23pc, respectively, as a result of lower ore grades.

A 10pc decline in Indonesian concentrate production related to a temporary cut in concentrate exports from January-April also affected global output.

The overall decline was partially offset by 17pc and 9pc YoY increases in Mexican and Peruvian concentrate output, respectively, with both countries benefitting from new and expanded capacity that was not fully available a year ago, ICSG analysts said.

Copper’s price has risen in response to a retreat in the dollar from its recent peaks and evidence of tightening supply. Last Wednesday, three-month copper on the London Metal Exchange ended up 1.6pc at $5,745 a tonne, having hit its lowest since June 8 at $5,630 earlier.

Copper prices rallied late last week on the heels of severe weather striking several South American mines, as well as labour issues cropping up in Indonesia.

According to a report from MarketWatch, copper prices climbed 1.12pc to $5,688 per mT on the London Metal Exchange.

Published in Dawn, The Business and Finance Weekly, June 26th, 2017