Oil Price Down as OPEC Meeting Gets Underway

Metals and gold prices up as cheaper dollar provides impetus

Oil Price Down as OPEC Meeting Gets Underway

OPEC’s technical meeting on quotas is underway in Vienna where delegates have been arriving this morning. Commenting on the chances of a hoped-for deal to cut production being announced later in the week, CMC Markets’ Michael Hewson said this morning:

_"As per usual it’s all about who will have do the business of cutting or capping output, with both Iran and Iraq reluctant to cut or cap too much, while Russia has paid lip service to a production freeze only. Without an agreement from these three any prospect of a deal is dead in the water, and while no one will want to do Saudi Arabia any favours, if there is no deal oil prices could fall further, and back below the July lows just above $40 a barrel.

"All this uncertainty is likely to mean that oil markets are likely to remain choppy as OPEC and non OPEC oil ministers toy with the oil market."_

Doubt that agreement is likely to be reached is growing after Saudi energy minister Khalid al-Falih stated that he believes 2017 will see increased demand balance the oil market without cuts to ouput. The comment is being interpreted as a check on expectations that cuts will be agreed.

Oil prices have fallen again, after losses towards the end of last week, with Brent Crude futures down 0.74% earlier this morning and WTI Crude futures 0.78% lower. Prices per barrel for the two oil categories are currently $46.89 and $45.70 respectively.

Gold price, on the other hand, is fighting back from losses last week and futures for February delivery at one point managed to re-touch the support level of $1200 broken last week. Spot prices are 0.7% up in London. Trump’s stated policy for fiscal stimulus and significant infrastructure investment in the U.S. is, however, likely to continue to apply downward pressure on gold for the foreseeable future and it looks like the precious metal’s realistic near-term target will be to minimise losses. Gold-based ETFs have seen a significant sell-off since Trump’s election victory with a net reduction of 64.7 tonnes. This has been balanced out to some extent by central banks, notably Russia, taking advantage of lower prices to add to physical stocks.

Base metals are continuing their rally today on the LME, up an average of 1.7% this morning, with trade volumes also significant. Zinc, lead and copper have all registered gains and are respectively up by 2.8%, 3.2% and 1.7%, while nickel has added 1.6% and aluminium 0.6%. The weakened dollar is proving to be the main impetus for metals today.

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