Portfolio

Commodities: Crude slip-slides lower on cocktail of concerns

By Andrew Schonberg

Date: Thursday 04 May 2017

Commodities: Crude slip-slides lower on cocktail of concerns

(ShareCast News) - Crude-oil futures are slip-sliding heavily lower on Thursday on a cocktail of concerns about higher than desired inventories, rising supply and Opec pledges on output.
At 15:34 BST, Nymex-priced West Texas Intermediate crude was down 2.57% to $46.59 a barrel. Intercontinental Exchange-traded Brent was down 2.38% to $49.58 a barrel.

This followed data from the US Energy Information Administration last night that showed stores there fell 930,000 barrels in the week to April 28, against views for a drop of 2.3m barrels.

American Petroleum Institute data a day earlier showed a smaller than hoped for draw.

Michael Hewson, chief market analyst at CMC Markets UK, said oil prices had slipped back again on reports that Russia had not decided on extending the output deal into second-half 2017.

He observed that Brent prices were slipping back to levels last seen in mid-March and below $50 a barrel, and potentially the lowest close since last November.

"This is significant given that it took Russia until April to meet the quota target, agreed at the end of last year," said Hewson.

"This tardiness suggests a rather lukewarm approach, compared to Saudi Arabia, who have met their quota targets."

Oil prices have been under pressure amid a chronic global glut of the black liquid, with variances in EIA and API data causing whipsawing in prices.

Concerns over cartel Opec extending its output pledges, rising rig counts and US shale production were further factors.

Jasper Lawler, senior market analyst at London Capital Group, noted that crude and gold were sinking together on Thursday.

"Brent crude oil sunk below $50 per barrel to its lowest since the November Opec meeting when the cartel agreed to cut production," said Lawler.

"It was a triple whammy for gold. There is minimal demand for a haven with (candidate Emmanuel) Macron seen as a shoe-in for the French presidency," he said.

"Commodities are getting pounded and the dollar, in which gold is denominated, is gaining traction after the Federal Open Market Committee (rate decision)."

On Comex, gold was down 1.51% to $1229.7 an ounce. Silver fell 1.43% to $16.31 an ounce, and copper dived 1.97% to 249.35 cents a pound.

Hewson said gold prices had continued to come under pressure on the back of a stronger US dollar, after the US Federal Reserve left interest rates unchanged last night.

He said Fed fund futures were presently assigning a 97.5% probability of a US rate rise in June.

Mike van Dulken, head of research at Accendo Markets, added that gold had made a bearish breach of $1240 that could take it back to $1200.

On London Metals Exchange, three-month industrial metals were down, mostly heavily. Copper dived 3.48%, zinc dumped 3.01%, tin shed 0.33% and aluminum fell 0.29%.

"Copper prices have also continued their slide down for three days in succession, undermined by another weak reading from the Chinese economy, against a backdrop of rising warehouse inventories," said Hewson.

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