Crude oil prices ease on China demand dip, rising US output
Gold edges higher
SINGAPORE/LONDON, June 9, (RTRS): Oil prices fell on Friday as weakening demand in China and surging US output weighed on markets despite supply woes in Venezuela and Iran on top of OPEC’s production cuts.
Brent crude futures fell 45 cents to $16.87 a barrel by 1333 GMT. US West Texas Intermediate (WTI) crude futures recovered some earlier losses to trade 8 cents down at $65.87. On the week, both contracts were set to trade flat.
China’s May crude oil imports eased away from a record high hit the previous month, customs data showed on Friday, with state-run refineries entering planned maintenance.
May shipments were 39.05 million tonnes, or 9.2 million barrels per day (bpd). That compared with 9.6 million bpd in April.
Further weighing on prices has been rising US output , which hit another record last week at 10.8 million bpd.
That’s a 28 percent gain in two years, putting the United States close to becoming the world’s biggest crude producer, edging nearer to the 11 million bpd churned out by Russia.
The surge in US production has pulled down WTI into a discount versus Brent of more than $11 a barrel, its steepest since 2015.
Despite Friday’s falls, Brent remains more than 15 percent above its level at the start of the year.
US investment bank Jefferies said the crude market is tight and spare capacity could dwindle to 2 percent of demand in the second half of 2018, its lowest level since at least 1984.
Markets have been tightened by supply trouble in Venezuela, where state-owned oil company PDVSA is struggling to clear a backlog of about 24 million barrels of crude waiting to be shipped to customers.
More generally, Brent has been pushed up by the voluntary production cuts put in place last year, led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia.
OPEC and Russia meet on June 22/23 to discuss production policy.
On Friday OPEC’s third-largest producer Iran criticised a US request that Saudi Arabia pump more oil to cover a drop in Iranian exports and predicted that OPEC would not heed the appeal.
“It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s exports due to their illegal sanctions,” Iran’s OPEC governor told Reuters.
Gold firmed on Friday as a rise in risk aversion ahead of G7 talks this weekend lent support, but the metal remained hemmed within its narrowest weekly rangin more than a decade as a recovery in the dollar kept a lid on gains.
Expectations that the US Federal Reserve will announce another rate increase next week are also weighing on gold.
Higher rates lift the opportunity cost of investing in non-yielding assets such as bullion.
Spot gold was up 0.1 percent at $1,298.21 an ounce at 1355 GMT, while US gold futures for August delivery were down 40 cents at $1,302.60 an ounce.
Gold has moved little since last Friday’s close, with the spread between its highs and lows the narrowest of any week since August 2007 at just $13.70 an ounce.
“There are offsetting factors now you have some upside to the dollar, but at the same time you have a bit of noise coming up on the trade side with the G7 upcoming,” ABN Amro analyst Georgette Boele said.
Next week’s Fed meeting, and a meeting of the European Central Bank, are also in focus, she added. “It’ll be important what the direction from the Fed is,” she said. “We are still expecting two more hikes after next week.”
World stocks fell on Friday as expectations of trade tensions dominating this weekend’s summit of G7 countries weighed on risk sentiment. The dollar edged off a threeweek low to rise 0.4 percent against the euro.
Leaders of the Group of Seven rich nations headed for a summit in Canada more divided than at any time in the group’s 42-year history, as US President Donald Trump’s “America First” policies risk causing a global trade war and deep diplomatic schisms.
Trump is set to meet North Korean leader Kim Jong Un on June 12 in Singapore, the same day as the Federal Open Market Committee starts its two-day meeting on interest rates.
“We also do not expect gold to make any lasting gains ahead of next week’s Fed meeting,” Commerzbank said in a note.
“Price-supportive factors are in short supply at present.”
Demand was soft this week in Asia, home of the world’s biggest physical gold markets, with Indian dealers offering customers deeper discounts during a weak period for sales.
Silver was up 0.6 percent at $16.76 an ounce, after hitting its highest in more than six weeks on Thursday. It was on track for a 2.1 percent rise for the week, its biggest in seven weeks, in line with gains in industrial metal copper. Palladium was flat at $1,011.75 an ounce, while platinum was 0.8 percent higher at $903.80 an ounce.