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Goldman Sachs Warns OPEC Deal Failure Will Lead to Supply Glut as Oil Price Hits Late October Highs

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Consolidating optimism that an OPEC deal to cap output will be struck on November 30th saw Brent Crude and WTI futures rise again early Tuesday, gaining 1.4% each, up to $49.63 and $48.93 respectively. While Russia is not an OPEC member, a coordinated production cut will have to be agreed upon for a cap to be successfully put in place. Positive statements attributed to Russian President Vladimir Putin suggest the Kremlin is confident that OPEC members will reach an agreement that will also work for Russia.

Market expectation that Russia is now on board and OPEC will reach consensus should mean that oil prices continue to move forward today, according to analysts at ANZ Bank, who released a statement saying:
_“With investors becoming more optimistic about OPEC reaching an agreement on production cuts, oil prices should continue to edge higher in trading today.”_
However, with Putin’s Russia ever an unpredictable element, Goldman Sachs warned in a note to its clients that while the chances of consensus over a cap are increasing, failure to reach an agreement would lead to a 0.7 million barrels per day surplus over Q1 of 2017.

Meanwhile, booming equities markets and receding concern over the incoming Trump administration in the U.S are keeping gold pinned to 9-month lows. December gold futures on Comex touched 9-month lows late on Monday before eventually finishing the day 0.1% up at $1,209.80 oz. As well as a lack of safe haven demand, the U.S. dollar’s strength on expectations of a December interest hike by the Fed is a further influence weighing on the precious metal.
In other metals, a slight dip in the U.S. dollar saw copper continue to add gains. In both London and on the Comex in New York, copper futures for 3-months and March delivery respectively added 2% and 2.5%. On the Comex, long positions on copper reached their highest ever values. Nickel also gained 5.1% on the London Metals Exchange (LME) yesterday.

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