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Commodities: Oil accelerates lower as markets fret over Opec pledge extension

By Andrew Schonberg

Date: Tuesday 09 May 2017

Commodities: Oil accelerates lower as markets fret over Opec pledge extension

(ShareCast News) - Crude-oil futures accelerated lower on Tuesday afternoon as markets fretted about the likelihood of cartel Opec extending its current production pledge.
The price of oil has been under pressure thanks to a chronic global glut, but Opec output pledges have met with rising US shale production and often rising inventories.

At 15:24 BST, Nymex-priced West Texas Intermediate crude was down 0.82% to $46.05 a barrel. Intercontinental Exchange-traded Brent was down 0.97% to $48.86 a barrel.

Traders will be looking with interest to US stores data out Wednesday and Thursday, and also very closely at Opec's meeting on 25 May.

Connor Campbell, financial analyst at Spreadex, noted Brent crude had slipped back below $49 a barrel. This, he said, was as "investors fret about the likelihood of Opec extending the current, and soon to be over, output limit agreement."

Michael Hewson at CMC Markets UK added that recent chatter about the prospect of the Opec output quotas being extended into 2018 was not supporting short-term oil prices.

The chief market analyst noted that with countries such as Libya were pumping at ever-rising levels, the prospect of a near-term decline in inventories was likely to become much harder.

This was particularly so at a "time when US shale producers have their feet pressed hard on the floor, as they continue to up production."

Meanwhile, on Comex, gold was down 0.57% to $1220.1 an ounce. Silver lost 0.63% to $16.16 an ounce, and copper rose 0.38% to 250.30 cents a pound.

"The decline in demand for safe haven assets continues to weigh on gold prices, as they drift back towards levels last seen at the beginning of March, around the $1,200 an ounce level," said Hewson.

Craig Erlam, senior market analyst at Oanda, observed that gold continued to trade in the red, with stronger dollar, improved risk sentiment and reduction in political risk all weighing on the yellow metal.

"There's been a notable inverse correlation with the euro over the last few weeks, highlighting the link between political risk and its safe haven appeal but with the election now behind us, that link may start to weaken," he said.

"With the dollar showing positive signs, gold may remain under pressure, with $1220 below being the next notable support level."

On the London Metals Exchange, three-month industrial metals were mixed. Copper fell 1.77% and aluminum shed 1.26%. Zinc added 0.27% and tin gained 0.64%.

Iron-ore prices had also declined further, dropping to their lowest levels since last October as concerns about Chinese demand continue to weigh on sentiment.

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