Oil

Oil prices fell last Thursday as Iran signaled it may support a small rise in Opec crude output, possibly paving the way for the producer cartel to agree a supply increase during a meeting on Friday.

“We expect OPEC and Russia to gradually add supplies back to the market by next year, mostly offsetting the almost 1 million barrels per day (bpd) supply disruption in Venezuela,” Barclays bank said.

Tehran had previously resisted pressure by OPEC’s de-facto leader Saudi Arabia to raise output.

However, prices were prevented from dropping further by robust US fuel demand seen in record refinery runs, strong travel data and a large decline in crude inventories.

Brent crude futures LCOc1 were at $74.34 per barrel at 0605 GMT, down 40 cents, or 0.5 per cent, from their last close.

US West Texas Intermediate (WTI) crude futures CLc1 were at $65.50 a barrel, down 21 cents,.

Energy ministers are gathering in the Austrian capital this week to determine the future of Opec’s 18-month-old agreement with Russia and other producers to limit oil output. The strategy has shrunk a global crude glut, but with oil prices recently hitting 3½-year highs, the producers are trying to reach consensus on easing the output caps to prevent the market from overheating.

Saudi Arabia and Russia, both of which have the ability to increase production, are pushing for a substantial output hike. Meanwhile, countries without spare capacity — including Iraq, Iran and Venezuela — began the week lobbying to keep the supply limits in place.

Russia’s Rosneft, the world’s top listed oil producer by output, said it plans an ambitious 87m tonnes of oil equivalent production expansion by 2022, to an overall output of 330m tonnes in order to gain global market share.

Prices for US benchmark oil futures settled with a gain Wednesday, at a nearly one-week high, after US government data revealed the biggest weekly decline in US crude supplies since January.

Global benchmark Brent crude prices, however, finished lower as traders monitored comments from major oil producers gathering for the much-anticipated Opec meeting at the end of the week.

July West Texas Intermediate crude US: CLN8 which expired at the end of the trading session, added $1.15, or 1.8pc, to settle at $66.22 a barrel on the New York Mercantile Exchange, the highest finish for the contract since June 14. August WTI crude CLQ8, -1.87pc which is now the front-month contract, tacked on 81 cents, or nearly 1.3pc, to $65.71.

August Brent oil LCOQ8, -2.21pc — the international benchmark—lost 34 cents, or nearly 0.5pc, to finish at $74.74 a barrel on ICE Futures Europe.

The US Energy Information Administration reported Wednesday that crude supplies dropped by 5.9m barrels for the week ended June 15. Analysts surveyed by S&P Global Platts had forecast a fall of 3.7m barrels.

Brent crude futures, the international benchmark for oil prices, were at $73.88 per barrel at 0144 GMT, up 83 cents, or 1.1pc, from their last close.

US West Texas Intermediate (WTI) crude futures were at $66.30 a barrel, up 76 cents, or 1.2pc.

Gold

Gold prices fell on a stronger dollar last Thursday, hovering close to a six-month low as the US Federal Reserve Chair confirmed an outlook for higher interest rates in the United States.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange fell by $7.1 or 0.56pc, to $1,267.40 a troy ounce by 1:13AM ET (05:13 GMT).  

The US dollar index, that monitors the value of the greenback relative to a basket of six currencies stood at 94.92, up by 0.15pc.

Dollar-denominated assets such as gold are sensitive to moves in the dollar – A rise in the dollar makes gold more expensive for holders of foreign currency and thus, reduces demand for the precious metal. 

Meanwhile, long-term Treasury yields also recovered from three-week lows on Wednesday, supporting the dollar’s rise on Thursday. 

In other precious metal trade, silver futures fell 0.52pc to $16.225 a troy ounce, while platinum futures fell 0.84pc at $863.40 an ounce

Gold prices are moderately lower and hit another six-month low in early-afternoon US trading Wednesday. Silver prices are slightly lower and hit a four-week low.

The near-term technical postures for both metals have deteriorated the past week, which is inviting the chart-based sellers into the futures markets. August Comex gold futures were last down $4.00 an ounce at $1,274.60. July Comex silver was last down $0.008 at $16.315 an ounce.

The safe-haven gold market cannot hold a bid despite some risk aversion seen in the marketplace this week, due to worries about a global trade war. It seems the specter of less global commerce in raw commodities if a trade war would break out is trumping safe-haven buying. Gold bulls are frustrated because at present their metal is acting like a raw commodity instead of a safe-haven asset.

A strong US dollar is also working against the precious metals markets. The US dollar index hit another 11-month high overnight. Since gold is priced in US dollars on most world markets, any appreciation of the greenback makes the metal more expensive to purchase in non-US currency.

Gold prices posted a six-month low on June 21, pressed down further by a firm dollar and as the US Federal Reserve Chair confirmed an outlook for higher interest rates in the United States.

Spot gold fell 0.2pc to $1,265.72 an ounce by 0343 GMT. It hit its lowest since December 21 at $1,264.21 earlier, having lost nearly 2.8pc over the last five sessions.

US gold futures for August delivery were down 0.5pc at $1,267.50 per ounce.

In other precious metals, silver fell 0.1pc to $16.24 an ounce, having earlier revisited its low touched on May 16 at $16.17.

Platinum slid 0.6pc to $862.15 an ounce. It touched $854.50, its lowest since Feb. 3, 2016, in the previous session. Palladium was 0.2pc lower at $962.20 per ounce. It hit a one-month low of $960.25 on Wednesday.

Published in Dawn, The Business and Finance Weekly, June 25th, 2018

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