Oil prices sank this week to one-month lows on the back of a strong US dollar and global supply glut fears, ahead of the OPEC cartel output meeting on Friday.
The rising greenback makes US dollar-denominated commodities more expensive for holders of other currencies. That tends to dent demand and prices.
OIL: London Brent oil dived to a six-week low and New York crude to a four-week trough on Thursday, as the market was shaken once more by the rebounding dollar and stubborn jitters over the global supply glut.
“Brent and WTI futures have been set for a monthly decline as the strong dollar dominates the oil market,” Sucden analyst Myrto Sokou said.
“Crude oil inventories have started to decline since mid-April 2015, suggesting a possible recovery of the US oil demand,” Sokou said.
“However, the strong dollar seems to limit any strong gains in the oil market for the time being.”
The US Department of Energy revealed on Thursday a healthy decline in crude oil and gasoline reserves, but also a rise in output that could aggravate the global oversupply.
The report showed that US commercial crude inventories fell 2.8 million barrels to 479.4 million in the week through May 22, while gasoline stockpiles fell 3.3 million barrels. The department also reported a rise in US crude production last week, by 304,000 barrels per day to 9.57 million.
Dealers have been hoping a slowdown in US output and increased demand during the summer driving season could whittle down the huge global supplies that were a key reason for the collapse in prices between June last year and January this year.
Those losses deepened in November after OPEC refused to cut output despite a global glut.
On Friday, the market focus switches back to OPEC’s production gathering in Vienna. The cartel’s official oil output target stands at 30 million barrels per day.
Market expectations are that it will maintain its output levels once again, due to satisfaction with oil prices, which have recovered significantly since February.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in July dropped to US$64.35 a barrel compared with US$65.57 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for July fell to US$58.52 a barrel from US$59.60 a week earlier.
PRECIOUS METALS: Gold slid to a three-week low at US$1,180.15 per ounce, taking a heavy knock from the rising greenback.
“Gold has been absolutely battered,” analyst Fawad Razaqzada at trading site Forex.com said.
“The considerably stronger dollar is chiefly responsible for this latest slide in the price of gold and other buck-denominated commodities,” Razaqzada said.
The dollar has risen following some positive US economic data and comments from US Federal Reserve Chair Janet Yellen last week that rates would go up “at some point this year.”
By Friday on the London Bullion Market, the price of gold dipped to US$1,191.40 an ounce from US$1,204 the previous week.
Silver stood at US$16.67 an ounce from US$17.25.
On the London Platinum and Palladium Market, platinum fell to US$1,115 an ounce from US$1,143.
Palladium increased to US$783 an ounce from US$769.
BASE METALS: Base or industrial metals prices diverged this week, having fallen heavily this month on Chinese demand worries and abundant supplies, particularly of aluminum.
By Friday on the London Metal Exchange, copper for delivery in three months slid to US$6,071.50 a tonne from US$6,173 the previous week.
Three-month aluminum fell to US$1,748 a tonne from US$1,770, while three-month lead increased to US$1,972.50 a tonne from US$1,954.
Three-month nickel eased to US$12,745 a tonne from US$12,790, while three-month tin declined to US$15,450 a tonne from US$15,805.
Three-month zinc rose to US$2,207 a tonne from US$2,171.
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