We seem to be writing the same two narratives on oil price gains and losses most days this years but oil prices have dipped again on the question of whether supply cuts promised by OPEC and their partners in coordinated reductions will prove sufficient to rebalance global inventories. Every other day prices are showing gains or losses based on the direction in which sentiment has taken on how effective the rebalancing strategy will prove to be and this week has started in the same vein. This morning Brent crude dropped by 10 cents a barrel to $55.35 and WTI also by 10 cents to $52.27.
When news come through of cuts being implemented on schedule by major exporters such as Saudi Arabia, sentiment, and prices, see an uplift. On days when no announcement confirming intentions or cuts is given sentiment swings to doubts as to whether the proposed cuts will be enough or will be fully complied with. Market participants look again towards global inventory figures which are still close to record highs. It now seems likely, barring other significant catalysts, that the current seesaw up and down every day or two will continue for the foreseeable future, at least until inventories start to see noticeable declines, or not, which would not be expected until some point around the conclusion of Q1.
Gold price, meanwhile, continued on its largely positive upwards trend from last week during Monday’s Asian session, spot prices adding 0.4% to $1,202 oz. U.S. gold futures gained 0.5% to $1201.8 oz. Market nerves around uncertainty likely to be provoked by a now expected ‘hard Brexit’ announcement by UK Prime Minister Theresa May tomorrow is helping gold as is the softening U.S. dollar. Gold has gained over 5% so far in 2017, making it one of the best performing major instruments, doing better even than the Nasdaq, which has added around 4% on its bull run since the new year. Analysts are split on the potential for significant further upside over the rest of the 1st quarter.
In base metals, copper prices have seen some fallback this morning on the London Metals Exchange. Encouraging data releases out of China and the U.S. last week saw base metals to strong gains and profit taking is being blamed for today’s early morning 0.27% slide for copper. Last week saw it add more than 5% and 3-month copper was trading at $5,894.50 a tonne on the LME this morning.