In the Singapore market, oil prices inched up on Thursday on a decrease in US crude inventories, but rising gasoline stocks and crude production weighed on the market.

US West Texas Intermediate (WTI) crude futures were at $56.09 a barrel, up 13 cents, or 0.23 per cent from their last settlement.

Brent crude futures LCOc1, the international benchmark for oil prices, were at $61.32 a barrel, up 10 cents, or 0.16pc. Higher prices came as US crude oil inventories fell by

5.6 million barrels in the week to Dec 1, to 448.1m barrels, putting stocks below seasonal levels in 2015 and 2016.

US crude production C-OUT-T-EIA climbed by 25,000 barrels per day (bpd) to 9.71m bpd, the highest since monthly figures showing the United States produced more than 10m bpd in the early 1970s.

US crude production rose to 9.7m barrels per day, another weekly record, though short of all-time records reached in the 1970s. That increase may undermine efforts by the Organisation of the Petroleum Exporting Countries, Russia and other producers to cut supply. Those cuts, which were extended at a meeting last week for the whole of 2018, have helped lift Brent prices more than 40pc since June.

Prices have slipped from November’s peak, which represented two-year highs.

The 14 Opec members, along with 10 oil states outside of the cartel, have reached an agreement to limit oil output until the end of 2018. This decision comes after what has already been more than a year of production cuts.

This new deal, wider and more inclusive than the one running since the beginning of this year, will also extend to Nigeria and Libya. Previously, these two countries were exempt from the production quotas, despite being Opec members, because of their struggles with internal political unrest.

Opec oil output fell in November by 300,000 bpd to its lowest since May, pressured by a drop in Angolan and Iraqi exports, strong compliance with a supply cut deal and involuntary declines.

Opec’s adherence to pledged supply curbs rose to 112pc from October’s 92pc. Top exporter Saudi Arabia pumped below its Opec target, as did all other members except Ecuador, Gabon and the United Arab Emirates.

Opec is reducing output by about 1.2m bpd as part of a deal with Russia and other non-member producers, which have also committed to production cuts.

China is importing increasing volumes of oil not only because of demand growth, but also because its domestic oil production is declining as large ageing fields mature and as companies cut production from higher-cost fields amid the lower-for-longer oil prices. Thus, Chinese dependence on crude oil imports is continuously rising and is set to further grow in the foreseeable future.

Last year, China met 64.4pc of its crude oil demand with imports, due to high production costs at home and favourable international prices resulting from the global glut. This was a 3.8pc increase compared to 2015, and the level of dependency was set to increase further this year.

According to an overview by the US Department of Commerce from July this year, China’s oil import reliance exceeded 65.6pc in 2016 and is forecast to rise to 80pc by 2030. By 2020, Chinese consumption of crude oil is expected at 12m bpd.

Gold

Gold is at its lowest point since July as investors regain their risk appetite and pivot back into stocks, with US lawmakers making progress on efforts to overhaul the US tax code.

The yellow metal dropped 1.4 per cent last Thursday, bringing its price to $1,246.46 a troy ounce, its lowest since July.

The move comes as optimism grows about the chances that tax reform will cross the finish line by the year’s end. Since gold is considered a haven asset — a safe store of value in tumultuous times — the news that tax reform may soon be boosting companies’ bottom lines have driven investors back into riskier equities and away from safer plays

In the London market, gold slid to its lowest in four months last Thursday as a bounce in the dollar sparked by optimism over US tax reform plans pushed the metal out of its recent narrow trading range.

Spot gold was down 0.6pc at $1,255.85/ounce, off an earlier four-month low of $1,254.51. US gold futures for December delivery were down $8.20/ounce at $1,257.90.

Global holdings of gold-backed exchange-traded funds (ETF) rose by 9.1 tonnes to 2,357 tonnes in November, with the net inflows coming entirely from Europe as the US dollar fell, the World Gold Council said recently.

The demand for the yellow metal remains subdued amidst a strong pick up in the sentiment surrounding the greenback, particularly after the Senate passed the tax reform bill earlier last week.

Copper

Copper prices rose last Wednesday, rebounding from their worst day in three years. Copper for March delivery closed up 0.5pc at $2.9615 a pound on the Comex division of the New York Mercantile Exchange.

Copper prices fell steeply to their lowest point in two months last Tuesday, while technology stocks rebounded following a rotation away from the high-flying group as investors assessed a US tax-cut proposal.

Copper lost 4.35pc to $6,529.00 a tonne as inventories rose, its biggest single-session decline in more than two years. Other metals, such as nickel and zinc, also fell.

Prices were also pressured by recent strength in the dollar, with many commodities denominated in the US currency.

On the LME, benchmark copper closed down 4.2pc at $6,542 a tonne, which was the worst drop in a single session since July 2015. LME copper also came under pressure from an uptick in warehouse inventories with headline stocks rising 10,650 tonnes to 192,550 tonnes.

Published in Dawn, The Business and Finance Weekly, December 11th, 2017