Oil

Oil prices eased last Thursday as US fuel inventories rose despite efforts by Opec to cut production and tighten the market. US West Texas Intermediate (WTI) crude futures CLc1 were trading at $51.08 per barrel, down 22 cents, or 0.4 per cent, from their last settlement.

Brent crude futures LCOc1, the international benchmark for oil prices, were at $56.62, down 32 cents, or 0.6pc, from the previous close.

Starting this year, Opec and other producers including Russia agreed to cut output by 1.8 million barrels per day (bpd) to prop up prices. Opec is widely expected to extend the cuts beyond the current expiry date of end-March 2018.

With rising US production undermining Opec’s efforts to tighten the market, inventories remain high.

Global supply and demand for crude oil will be largely balanced next year, as growth in consumption helps erode a three-year-old overhang of unused fuel and should mostly offset a steep rise in output, the International Energy Agency said.

In its monthly oil market report, the Paris-based IEA said it continues to see global demand for crude growing by 1.6 million barrels per day (bpd) in 2017, before moderating to 1.4m bpd in 2018.

The IEA said it expects demand for Opec’s crude to rise to 32.98m bpd in the fourth quarter of this year, above September’s output, and then to fall to 31.87m bpd in the first three months of 2018.

The IEA said it sees non-Opec crude supply rising by 700,000 bpd in 2017, and by 1.5m in 2018 to reach 59.6m bpd, with the United States being the largest contributor.

The US Energy Information Administration raised its price forecasts on West Texas Intermediate and Brent crude oil for this year and next, and lifted its US production outlook for 2018.

In its monthly energy outlook report, the government agency forecast WTI prices at $49.69 a barrel for this year, up 1.7pc from its September forecast.

For 2018, it forecast $50.57-up two per cent from the previous outlook. The EIA also upped its 2017 forecast on Brent crude by 2.7pc to $52.43 and its 2018 outlook by 4.8pc to $54.07. It modestly lowered its US crude production view to 9.24m barrels per day this year, but raised its 2018 output view by 0.8pc to 9.92m barrels a day.

France’s lower house of parliament recently gave its overwhelming backing to a ban on producing oil and gas on French territory by 2040.

No new permits will be granted to extract fossil fuels and no existing licences will be renewed beyond 2040, when all production in mainland France and its overseas territories will stop.

France extracts the equivalent of about 815,000 tonnes of oil per year.

The ban will affect companies prospecting for oil in the French territory of Guyana in South America, while also banning the extraction of shale gas by any means.

Gold

Gold rose to its highest level in two weeks, last Thursday. In its fifth straight session of gains, spot gold was up 0.3pc at $1,295.58 an ounce, after earlier hitting $1,297.40.

US gold futures climbed 0.7pc to $1298 per ounce.

Gold prices extended gains from the previous session amid a muted US dollar after minutes from the US Federal Reserve’s September policy meeting revealed low inflation concerns.

Gold is highly sensitive to rising interest rates, as these tend to boost the dollar, in which the metal is priced. Political uncertainty also helped to support gold, which investors turn to during periods of turmoil.

The tensions arising from Catalonia and North Korea were enough to prompt some safe haven buying in gold and silver, yet not strong enough to overcome the market’s concerns over higher interest rates.

Fed funds futures showed traders were pricing in a nearly 90pc chance of a December rate increase.

The World Gold Council has put India’s yellow metal demand for calendar year 2017 at between 650 tonnes and 750 tonnes.

The Indian government will soon notify a new threshold for reporting to authorities about transactions in gold and other precious metals and stones with a view to curb parking of black money in bullion.

China aims to increase its annual gold output to 500 tonnes by 2020 from around 450 tonnes currently.

Last year, 70,000 tonnes of gold were traded in China on spot exchanges, futures exchanges and over-the-counter at banks, and that amount was expected to exceed 100,000 tonnes by 2020.

In the first half of 2017, China produced 207 tonnes of gold, a drop of 9.8pc from a year ago, although gold consumption rose nearly 10pc to 545 tonnes, with consumption of gold bars up more than 50pc.

In a recent statement by the World Gold Council shows that the Central Bank of Russia (CBR) had more than doubled the pace of gold purchases over the past decade.

The CBR, the Council said, was believed to have already added more than 1,250 tonnes to its gold reserves.

According to the World Gold Council, Russia is not only the largest official buyer of gold but also the world’s third-biggest producer, with the central bank purchasing from domestic miners through commercial banks.

Published in Dawn, The Business and Finance Weekly, October 16th, 2017