The oil market was gripped this week by an output freeze deal between the world’s top two producers Saudi Arabia and Russia.
Prices initially rebounded on Tuesday, before hitting reverse as traders assessed a preliminary agreement between Russia and OPEC members Saudi Arabia, Venezuela and Qatar to limit output at last month’s levels, provided other major producers followed suit.
The news sparked hopes the market would stabilize after sinking to near 13-year lows last week on the stubborn supply glut — but disappointed those looking for an output cut.
“It has been another tumultuous week for oil markets this week after ... newsflow has pointed to a potential resolution to the ongoing supply glut,” analyst James Hughes at traders GKFX said.
“Undoubtedly the biggest story of the week was the news that Saudi Arabia and Russia had agreed to freeze production... However, the obvious problem with that is that we are already at record highs for oil production,” he said.
“The news saw oil prices jump higher, before dropping on the prospect that Iran and Iraq were not on board,” he added.
Saudi Oil Minister Ali al-Naimi said Tuesday’s decision was “the beginning of a process which we will assess in the next few months and decide whether we need other steps to stabilize ... the market.”
Meanwhile, Iran entered talks with other producers to address low prices — but stopped short of committing itself to any production cutbacks.
Iran, which has been pumping oil at maximum levels since a deal with Western powers ending sanctions, said in response to the freeze announcement that “there is room for discussion,” but Iranian Oil Minister Bijan Zanganeh added that Tehran “won’t relinquish” market share.
The 13-nation OPEC has refrained from cutting output as it looks to maintain market share in the face of competition from US shale oil producers.
Russia — which is not an OPEC member — has seen its recession-hit economy damaged further by the slump in oil.
Oil prices also ran out of steam on Thursday and Friday after the US Department of Energy said US commercial crude inventories rallied 2.1 million barrels last week to reach the highest level in more than eight decades.
An inventories rise typically suggests soft demand in the world’s biggest oil consumer and is bad news for a market wallowing in excess supply.
Saudi Foreign Minister Adel al-Jubeir rejected any reduction in his country’s crude output.
“If other producers want to limit or agree to a freeze in terms of additional production, that may have an impact on the market, but Saudi Arabia is not prepared to cut production,” Jubeir said in an Agence France-Presse exclusive interview.
In early afternoon deals on Friday, US benchmark West Texas Intermediate for March delivery slid US$0.81 to US$29.96 a barrel.
Brent North Sea for April dipped US$0.77 to US$33.53 per barrel compared with Thursday’s close.
Gold futures had a third straight gain and a gauge of mining shares advanced to a seven-month high as declines in global equities and crude oil boosted demand for the metal as an alternative asset.
Stocks worldwide trimmed weekly gains as oil declined for the first time in three days, denting optimism that this year’s rout in commodities was easing.The BI Global Gold Mining Competitive Peers Index of 45 producers climbed to the highest since July, and Barrick Gold Corp, the world’s largest producer of the metal, touched the highest in 17 months.
Gold is off to its best start since 1980 on signs of weakness in the global economy and sliding commodity prices, helping boost shares of producers. Investors are piling back into the metal amid speculation that the US Federal Reserve will delay further interest-rate increases, boosting the appeal of bullion as a store of value. The BI index has surged 35 percent this year after slumping for a fifth straight year last year.
“People are realizing that the world is not as stable as they once thought,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “Gold prices are going to rise and it’s the smartest miners that are going to do well.”
Gold futures for April delivery gained 0.4 percent to settle at US$1,230.80 an ounce at 1:40pm on the Comex in New York. The metal has advanced 16 percent this year.
Barrick climbed as much as 3.1 percent in Toronto to C$17.89, the highest since September 2014.
Holdings in bullion-backed exchange-traded products rose on Thursday for a sixth straight session to 1,615.4 tonnes, the highest since May, data compiled by Bloomberg show.
Silver futures slipped on the Comex in New York, while palladium fell and platinum was unchanged on the New York Mercantile Exchange.
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