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Oil Prices Reach Year-High on Thursday as Brent Crude Touches $54 a Barrel

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Yesterday saw oil prices reach their highest level in a year, while trading volumes on oil for February and March delivery hit record levels. Brent Crude was up a little under 4% to $54 a barrel at one point and WTI also gained 3.3% to $51.06. The fact that Russia has agreed to join the deal, the first such co-operation between OPEC and the Kremlin in 15-years, as well as other major non-OPEC exporters such as Azerbaijan announcing their readiness to follow suite, has added to the positivity surrounding the agreement.

Today has seen a slight dip for oil and Brent Crude has consolidated at around the $53.5 level in Friday morning trading. Where oil prices go from here will largely be dictated by concrete developments on the implementation of the agreed output reduction. There is still a degree of scepticism as to how quickly and effectively the theoretical pact will be put into place and market participants will want to begin to see evidence that output is actually falling if oil prices are to move consistently beyond $55.

While many market analysts are now predicting $60 a barrel over 2017, others are sounding a note of caution. How many non-OPEC members agree to cut production is the key element to the ongoing stability of higher oil prices. A number of industry experts are cautious as to how realistic keeping prices above $50 is over the longer term. The concern is that oil prices in the $55 to $60 band will lead to increased production by U.S. shale producers and from less cost-efficient areas like the North Sea, increasing supply and pulling prices back down below $50 again before the end of 2017.

Gold prices dropped on Thursday, down 0.4% to $1,169.40 oz. with positive U.S jobs data expected out today. Forecasts are for 170,000 new jobs to have been created in November, up from 161,000 in October and for unemployment figures to have remained steady. Confirmed figures coming in anywhere near the forecasts will almost certainly be considered as final confirmation the Fed will raise interest rates in December, which will boost the U.S. dollar. However, there is unlikely to be any major shifts as markets have already decided that the hike will take place and have priced it in. Gold price is steady this morning in London.
Base metals rebounded yesterday but dropped again today and were averaging a 0.8% loss on the LME this morning. Copper price is down 0.7%, zinc 1.9% and lead 1.4%.

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